When applying for a mortgage, every dollar of qualifying income matters. Many borrowers don’t realize that child support income can be grossed up, meaning we can increase its value when calculating your debt-to-income (DTI) ratio. Since child support is considered non-taxable income, Fannie Mae, Freddie Mac, and FHA allow lenders to adjust it to reflect its true purchasing power.
Conventional Loans (Fannie Mae & Freddie Mac)
For conventional loans backed by Fannie Mae or Freddie Mac, child support income can be grossed up by 125%. This adjustment helps borrowers qualify for a higher loan amount by improving their DTI ratio.
FHA Loans
FHA loans also permit grossing up child support income, but at a slightly lower rate, 115%. This can still make a significant difference in mortgage approval, especially for borrowers on the edge of qualifying.
Grossing up non-taxable income like child support allows us to account for the fact that taxes don’t reduce this money. By increasing its value in the underwriting process, borrowers may qualify for a larger mortgage or better loan terms.
If you receive child support and are considering a home purchase, make sure your lender factors in this adjustment. We help borrowers maximize their qualifying income; contact us to explore your options!
