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Child Support Income for Mortgage Files: Ask Early, Document It, Count It Right
Updated: Oct 2
Initial underwriting comes back with a condition you weren't expecting: explain the $812 child support deduction on the paystub and provide the decree. It wasn't on the 1003, and it isn't on the credit report. Once it's added, the DTI goes from 44 to just over 50.
Child support income for mortgage files works in both directions. It can help a borrower qualify, or it can change the numbers after the fact. Either way, it's easier to sort out on the first call than after the conditions come back.
How do you ask about child support?
You ask. You just ask the right way.
Reg B lets you ask whether income comes from child support, as long as you tell the borrower they don't have to reveal it:
"A creditor shall not inquire whether income stated in an application is derived from alimony, child support, or separate maintenance payments unless the creditor discloses to the applicant that such income need not be revealed if the applicant does not want the creditor to consider it in determining the applicant's creditworthiness."12 CFR 1002.5(d)(2), Regulation B: Disclosure about income from alimony, child support, or separate maintenance
The obligation to pay is different. You can ask that directly:
"For example, the creditor may ask about: i. The applicant's obligation to pay alimony, child support, or separate maintenance income."Regulation B, Official Interpretation of 1002.5(d)(1): Indirect disclosure of prohibited information
So we ask both directions on the borrower call:
"Do you receive child support or alimony you want counted? You don't have to tell us if you don't want it used."
"Are you required to pay child support or alimony to anyone?"
Two questions. Thirty seconds. The second one matters more, because that debt usually doesn't show up on credit.
Can you use child support income for mortgage qualifying?
Yes, if the borrower wants it used. Disclosure comes first:
"The lender may include alimony, child support, equalization payments, or separate maintenance as income only if the borrower discloses it on the Uniform Residential Loan Application and requests that it be considered in qualifying for the loan."Fannie Mae Selling Guide B3-3.4-02, Alimony, Child Support, Equalization Payments, or Separate Maintenance
Then the file needs three things.
The order. Divorce decree, separation agreement, court order, or other written legal agreement. Separated with no agreement? Fannie won't count it:
"If a borrower who is separated does not have a separation agreement that specifies alimony or child support payments, the lender should not consider any proposed or voluntary payments as income."Fannie Mae Selling Guide B3-3.4-02: Documentation
Receipt. Six months on Fannie, and it has to be the full amount, on time:
"A minimum six-month history is required. The payment history must demonstrate the stability of the income, as reflected in the receipt of full, regular, and timely payments."Fannie Mae Selling Guide B3-3.4-02: Income History
Freddie also wants six months (Freddie Mac Guide 5305.1). FHA wants three months with a decree or court order, and 12 months of documentation if the agreement is voluntary (HUD Handbook 4000.1).
Continuance. At least three years from the note date, and check the kids' ages:
"The lender must document that the income is expected to continue for at least three years from the note date. Note: Check for limitations such as the age of the children for whom the support is being paid, or the duration over which alimony is required to be paid."Fannie Mae Selling Guide B3-3.4-02: Income Continuance
Partial payments are the most common issue. Order says $900, deposits show $650, $900, nothing, $400. That isn't "full, regular, and timely," and an explanation letter usually won't change that.
One thing people miss:
"The full amount of documented qualifying child support income is nontaxable and may be grossed up."Fannie Mae Selling Guide B3-3.4-02: Determination of Qualifying Income
When the borrower pays it
This side gets missed more often.
On Fannie, child support required under a divorce decree, separation agreement, or other written legal agreement goes in the DTI if it has more than ten months left:
"When the borrower is required to pay alimony, child support, equalization payments, or separate maintenance payments under a divorce decree, separation agreement, or any other written legal agreement—and those payments must continue to be made for more than ten months—the payments must be considered as part of the borrower's recurring monthly debt obligations."Fannie Mae Selling Guide B3-6-05, Monthly Debt Obligations: Alimony, Child Support, Equalization Payments, and Separate Maintenance Payments
Alimony can be handled as a reduction to income instead. Child support can't. It's a debt.
"For alimony, equalization payments, and separate maintenance obligations, the lender has the option to reduce the qualifying income by the amount of the obligation in lieu of including it as a monthly payment in the calculation of the DTI ratio."Fannie Mae Selling Guide B3-6-05, Monthly Debt Obligations: Alimony, Child Support, Equalization Payments, and Separate Maintenance Payments
Voluntary payments don't have to be counted. Either way, get the decree or order in the file to show the amount.
"However, voluntary payments do not need to be taken into consideration and an exception is allowed for alimony. A copy of the divorce decree, separation agreement, court order, or equivalent documentation confirming the amount of the obligation must be obtained and retained in the loan file."Fannie Mae Selling Guide B3-6-05, Monthly Debt Obligations: Alimony, Child Support, Equalization Payments, and Separate Maintenance Payments
A garnishment on the paystub gets the same treatment:
"All garnishments with more than ten months remaining must be included in the borrower's recurring monthly debt obligations for qualifying purposes."Fannie Mae Selling Guide B3-6-05, Monthly Debt Obligations: Garnishments
FHA treats child support as a recurring liability. The lender needs the decree or order plus paystubs covering at least 28 consecutive days to check for garnishment, and the qualifying payment is the greater of the order amount or the garnishment (HUD Handbook 4000.1).
So when we see a garnishment on a paystub, a support payment in the bank statements, or "divorced" with no decree in the file, we flag it within one business day. Better it comes from us before submission than from underwriting after.
And we stay in our lane. We explain what the lender needs and get the documents. Whether that income goes on the file, and what a new DTI means for the deal, that's your call. You get the note and a heads-up text so it's not a surprise.
Guideline references reflect our understanding at publication. Confirm against the current guide and your lender's overlays before you rely on them.
Bottom line
Child support usually isn't the hard part of a file. Finding out about it from an underwriting condition is.
Ask both questions at application and it's just part of the file. Wait for underwriting to find it and you're re-running numbers and having a conversation with your borrower that could have happened weeks ago.
Want a processor who asks the awkward questions up front?
Make Sense Processing is contract processing for loan officers in the broker channel. A borrower call on every request, one consolidated document list, and a heads-up within one business day when something like a garnishment shows up in the file.
For mortgage professionals only. This is a business-to-business communication for loan originators and brokers. It is not intended for consumers and is not an offer of credit. Make Sense Processing provides contract loan processing services to licensed originators. We do not originate loans, take loan applications, or offer, negotiate, or advise on rates, terms, programs, or qualification. Nothing here is legal or compliance advice, and guidelines vary by lender, program, and state, so verify anything you plan to rely on.Make Sense Processing | NMLS #2351904 | License #MB-2002084
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