Could You Lose Your USDA Approval Over Child Support Income? Paul Nearly Did
Paul almost lost his USDA approval because of income he was sure would count: child support that may not continue for two years. Paul is a fictional, illustrative buyer near Sullivan's Island, SC, but his situation is one that comes up often for buyers who receive child support or alimony and are considering a USDA loan.
Paul's Assumption
Paul receives child support. He planned to list it as income on his USDA loan application, the same way he would list a paycheck. In his mind, the logic was simple: the money arrives, so it counts.
That assumption is where the trouble starts. Receiving support and having it count toward repayment income are two different things under the USDA guideline.
What the USDA Guideline Says
The USDA guideline has two parts that matter here. The first is about stability. It says income from child support and alimony received by the household is considered stable when based on:
- a law, written agreement or court decree, or consistently received over a 12-month period even without a written agreement
- the amount and regularity of payments
- eligibility criteria such as age of child
- availability of means to compel payments
The second part is the continuance test. Here is the exact wording: "If the income is not expected to continue for the next two years (e.g., child turning 18), it is excluded from repayment income but counted in annual income."
Why the Two-Year Rule Matters
For Paul, the key phrase is "not expected to continue for the next two years." If the support is set to end inside that window, for example because of the age of the child, it is excluded from repayment income. That is the income used to show you can repay the loan. It still counts in annual income, which is a separate measure.
So a buyer can have support that is real, regular and court ordered, and still find that it does not help with repayment income. That is the surprise that catches people. Building a budget around income that will be excluded can mean a smaller approval than expected, or no approval at all.
What Paul Did Differently
Paul stopped assuming and started documenting. Before anyone ran numbers, he looked at the end date of his support and gathered the paperwork that proves how long it is expected to continue. That one step changed the conversation from a surprise at underwriting to a plan at the start.
The Question to Ask Your Loan Officer
If you receive child support or alimony, ask this:
"Is my child support expected to continue for the next two years, and what documents do you need to show that?"
Then bring the right documents:
- The court decree or written agreement, or proof of 12 months of consistent receipt
- Documents showing the child's age or the date support ends
Those two items speak directly to the stability tests and the continuance rule in the guideline. They let your loan officer see what the guideline will see.
A Few Practical Notes
Check the age of the child and the end date in your decree or agreement before you start house hunting, not after. If you have no written agreement, 12 months of consistent receipt is another way the guideline looks at stability, so keep records of what you have received. And remember that every file is different. Whether any income counts depends on your documents and the lender's review, and nothing here is a promise of approval.
Let Me Help You Find the Path
If you receive child support or alimony and are weighing a USDA loan, I would be glad to look at your situation and explain how this rule applies. I am Jason Sharon with Home Loans Inc, and my job is to find the path. Call me at 843-LOW-RATE or visit homeloansinc.com.
Home Loans Inc - Jason Sharon, Mortgage Broker. Company NMLS #1728740, Jason Sharon NMLS #1281448. Equal Housing Opportunity.
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