Using Alimony and Child Support as Qualifying Income for Your Mortgage

Introduction

When applying for a mortgage, lenders assess your income stability and reliability. For those receiving alimony or child support, these payments can be crucial sources of qualifying income. This article will explore how alimony and child support can contribute to your mortgage application under Fannie Mae’s guidelines.

Alimony and Child Support as Qualifying Income

Alimony and child support can enhance your income profile for mortgage purposes, allowing you to qualify for higher loan amounts. However, it’s essential to provide documentation that demonstrates the consistency and continuity of these payments.

Key Requirements for Alimony and Child Support Qualification

1. History of Receipt

• Documented Proof: Lenders require at least six months of documented, regular alimony or child support payments.
• Consistency Matters: Payments must be consistent and meet the full required amount. Partial or sporadic payments are considered unstable and are therefore ineligible for income qualification.

2. Continuance of Payments

• Three-Year Continuance: Lenders look for documented proof that alimony or child support payments will continue for at least three more years.
• Legal Documentation: Accepted documents include divorce decrees, separation agreements, or any legally binding agreements specifying payment amounts and terms.

3. Documentation Requirements

• Finalized Agreements: A copy of your final divorce decree, legal separation agreement, or court order is necessary.
• Proof of State Mandates: If applicable, provide documentation verifying any state laws that mandate the payment of alimony or child support under specific terms.

Grossing Up Nontaxable Income

If the alimony or child support is non-taxable, lenders may “gross up” the income. This process involves adjusting the payment amount to reflect its untaxed status, potentially increasing your qualifying income by 25% or more. Grossing up nontaxable income can make a substantial difference in your mortgage eligibility.

Conclusion

Using alimony and child support as qualifying income can strengthen your mortgage application, provided you meet the Fannie Mae guidelines. Ensure your payments are well-documented, consistent, and legally binding to maximize your chances of loan approval.

By understanding the qualifications and preparing the necessary documentation, you can leverage these income sources effectively to achieve your homeownership goals.

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