January 23, 2015
A reader asks, “For FHA loan will child support stop you from getting a loan?”
Let’s see what the FHA official site (www.FHA.gov) has to say about this question. On a frequently asked questions page at the official site, we find the following:
“Most recurring obligations, including child support and alimony are considered in computing debt-to-income ratios. Debts lasting less than ten months must be counted if the amount of the debt affects the borrower’s ability to make the mortgage payment during the months immediately after loan closing; this is especially true if the borrower will have limited or no cash assets after loan closing.
Because of the tax consequences of alimony payments, the lender may choose to treat the monthly alimony obligation as a reduction from the borrower’s gross income in calculating qualifying ratios, rather than as a monthly obligation.”
For some additional information let’s examine what the FHA loan rules published in HUD 4155.1 say on this issue. From Chapter Four Section C:
When computing the debt-to-income (DTI) ratio, the lender must include the following recurring obligations:
–monthly housing expense, and
–additional recurring charges extending ten months or more, such as:
–payments on installment accounts
–child support or separate maintenance payments revolving accounts
–alimony.
Debts lasting less than ten months must be included if the amount of the debt will affect the borrower’s ability to pay the mortgage during the months immediately after loan closing, especially if the borrower will have limited or no cash assets after loan closing.
Note: Monthly payments on revolving or open-ended accounts, regardless of their balances, are counted as liabilities for qualifying purposes even if the accounts appear likely to be paid off within ten months or less.”
As you can see from the above, there is nothing that requires the lender to deny a loan application based on the borrower paying or receiving child support.
Do you have questions about FHA home loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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