This is crucial in getting a mortgage when different types of income are evaluated. One type of income is child support, which is viewed differently by conventional loan programs and FHA loan programs.
Conventional Loans: Fannie Mae vs. Freddie Mac
For conventional loans, there are specific requirements for using child support as qualifying income:
1. Collection History: Continuous receipt of child support for at least 6 months is required. This history helps demonstrate the reliability of the revenue stream.
2. Documentation: The borrower must provide documentation of the child support terms, usually through a court order or legal agreement. Additionally, proof of equal monthly payments is required. Without this documentation, income cannot be used for qualification purposes.
FHA Loans: More flexible requirements
FHA loans offer greater flexibility in child support income
1. There is a court order: If the court order outlines the terms of child support and provides proof of consistent payments, only 3 months of payment history is required. This is a significant advantage for someone who has recently begun receiving child support payments.
2. No court order:
- If monthly payments are consistent, 6 months of receipt history is required.
- If the payment amounts are different, you need to calculate the 2-year average of the earnings, or regardless of how long ago the payments were received. This approach provides a more complete picture of revenue over time.
Understanding these differences can help borrowers better prepare their documents and set realistic expectations when applying for a mortgage. Whether you are considering a conventional loan or an FHA loan, understanding how child support income is assessed can make the process smoother and more efficient. We are here to guide you. Please contact us to learn more about using child support to qualify for a mortgage loan.
