Does Alimony/Child Support Count As Income?

We’ve been discussing topics this week related to FHA loan rules for income and employment. The participating FHA lender is responsible for verifying an FHA loan applicant’s employment and income to make sure it is a stable and reliable source of income.

Not all forms of income can be used on the FHA loan application. Sporadic income that is not consistent income such as sales from online websites (ie. Ebay, Amazon, Paypal), for example, may not qualify, and certain types of commissions may not qualify depending on their frequency. GI Bill housing stipends cannot be used because they are not “likely to continue” past a certain number of months.

Then there is the common question about child support and/or alimony payments. Can this form of income, if declared on the FHA loan application, be used to qualify for the mortgage?
Chapter Four of HUD 4155.1 provides the answers.

“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.”

Are FHA loan applicants with less than 12 months of child support or alimony income left out in the cold? Not if certain conditions are met, according to Chapter Four:

“Periods less than 12 months may be acceptable, provided the lender can adequately document the payer’s ability and willingness to make timely payments.”