April 24, 2017
A reader asked a question in our comments section about FHA loan rules for alimony and child support payments:
“What is a voluntary payment agreement? I am divorced its a closed case and I actually pay a little more than what we agreed to in the official settlement agreement. Shes now trying to buy a house and will be dealing with the whole proving amount of alimony/child support and its very difficult to amend a closed case.”
“If we have an agreement between ourselves for (x) dollars/month for (x) amount of time and have this notarized, would this constitute a voluntary payment agreement?”
The reader is referencing an earlier blog post from 2013, which includes the following about how the lender may consider alimony and child support as part of a borrower’s effective income for purposes of calculating the debt to income ratio:
“Alimony, child support, or maintenance income may be considered effective, if
payments are likely to be received consistently for the first three years of the mortgage
the borrower provides the required documentation, which includes a copy of the
− final divorce decree
− legal separation agreement,
− court order, or
− voluntary payment agreement, and
the borrower can provide acceptable evidence that payments have been received during the last 12 months, such as
− cancelled checks
− deposit slips
− tax returns, or
− court records.”
Basically, FHA loan rules don’t spell out what is considered an acceptable voluntary payment agreement-the lender may have a standard that the borrower will need to know about, but in any case the lender will be required to document the income by means of the cancelled checks and other evidence as mentioned above.
The reader question references an older version of the FHA loan rules-let’s examine the rules from HUD 4000.1 to see if anything has changed since 2013, starting with the FHA definition of alimony, child support, et cetera:
“Alimony, Child Support, and Maintenance Income refers to income received from a former spouse or partner or from a non-custodial parent of the Borrowers minor dependent.”
Furthermore:
“The Mortgagee must obtain a fully executed copy of the Borrowers final divorce decree, legal separation agreement, court order, or voluntary payment agreement with documented receipt. When using a final divorce decree, legal separation agreement or court order, the Mortgagee must obtain evidence of receipt using deposits on bank statements; canceled checks; or documentation from the child support agency for the most recent three months that supports the amount used in qualifying.”
“The Mortgagee must document the voluntary payment agreement with 12 months of canceled checks, deposit slips, or tax returns. The Mortgagee must provide evidence that the claimed income will continue for at least three years. The Mortgagee may use the front and pertinent pages of the divorce decree/settlement agreement and/or court order showing the financial details.”
Speak to your loan officer to determine what may be required in your state or at that specific financial institution as state law and lender standards may apply in addition to FHA loan rules.
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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