July 31, 2013
FHA loan rules say that a borrower’s income must be verified in order for it to count when the lender makes debt-to-income ratio calculations necessary for approving (or denying) the mortgage loan. Verifiable income is defined basically as earnings that are stable, reliable, and likely to continue.
A borrower’s full or even part-time employment would count in most cases. But the money a borrower makes, for example, by selling items on eBay, would likely not pass the “stable” or “likely to continue” requirements.
When it comes to non-job “income” such as child support or alimony payments, FHA loan rules make provisions that allow this income to be counted under the right conditions. A borrower does not have to declare child support income under the Fair Housing Act, but it is not declared, it cannot be considered.
What does the FHA rulebook say about child support and alimony payments?
“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.”
The FHA adds that periods of alimony or child support less than 12 months may be counted “provided the lender can adequately document the payer’s ability and willingness to make timely payments. Child support may be ‘grossed-up’ under the same provisions as non-taxable income sources.”
For more information on alimony or child support as verifiable income, discuss your situation with your loan officer.
Do you have questions about FHA loans or refinance 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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