Child support & DTI ratios

[Anonymous]

Are child support payments (am't paid out of your budget for child support) included in a lender's assessment of your DTI ratio?

[tryingtogetitrightnow]

I am pretty sure they are. It really hoses your DTI too. I wish they would just cut my income by the amount I pay in CS each month. The difference in what kind of home mortgage you can qualify for is staggering. Here's my situation (with NO other debts besides child support), and using 41% DTI backend ratio:

Child Support considered a debt: $336,217
Child Support deducted from gross income: $460,109
Child Support not considered at all: $546,204

I understand Child Support is deducted from net income, not gross income, so that's why they wouldn't use the second method of calculation, and the third method does not make sense because it is an amount that is paid out. However, it is supposed to reduce that amount that you spend to support your children, so you would think that would matter. Is there leniency given to DTI ratios in cases like these? Or is it true that it will drop the amount of mortgage I can qualify for by this much? By the way, I'm most likely going to go VA (but might go FHA).

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@Anonymous wrote:

Are child support payments (am't paid out of your budget for child support) included in a lender's assessment of your DTI ratio?

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[ShanetheMortgageMan]

Child support is added as a monthly debt in the DTI calculation - it's not treated as a reduction of qualifying income.  Here's some additional info:

Court ordered child support is considered to be a long term obligation. The payment from the 1003, pay stub or other documentation in the file must be included in the debt to income ratio. In order to negate the payment the borrower must provide documentation that there are less than 10 payments remaining.

Voluntary child support is also considered a long term debt when disclosed by the applicant or when disclosed by documentation in the loan file.

Child support that is in arrears must be brought current. If a payment schedule has been established with the court for the past due amount and a history of satisfactory payments is provided, the applicant will not be required to pay the past due amount in full. Both the payment for the past due child support and the regular court ordered support payment will be included in the applicant’s income to total debt ratio.

Voluntary child support is considered to be a liability on FHA financing if disclosed by the applicant. The applicant should provide documentation, such as a voluntary child support agreement or other documents, to support the amount and duration of the child support to be paid.

[fused]

Hi Shane! Can you please post your source. TY!

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ShanetheMortgageMan wrote:

Child support is added as a monthly debt in the DTI calculation - it's not treated as a reduction of qualifying income.  Here's some additional info:

Court ordered child support is considered to be a long term obligation. The payment from the 1003, pay stub or other documentation in the file must be included in the debt to income ratio. In order to negate the payment the borrower must provide documentation that there are less than 10 payments remaining.

Voluntary child support is also considered a long term debt when disclosed by the applicant or when disclosed by documentation in the loan file.

Child support that is in arrears must be brought current. If a payment schedule has been established with the court for the past due amount and a history of satisfactory payments is provided, the applicant will not be required to pay the past due amount in full. Both the payment for the past due child support and the regular court ordered support payment will be included in the applicant’s income to total debt ratio.

Voluntary child support is considered to be a liability on FHA financing if disclosed by the applicant. The applicant should provide documentation, such as a voluntary child support agreement or other documents, to support the amount and duration of the child support to be paid.

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[ShanetheMortgageMan]

Underwriting manual from a former broker of mine.