Mortgages and child support
May 3, 2005 11:51 AM   Subscribe

I am looking for practical advice regarding mortgage applications and reporting child support.

I am just about to embark upon purchasing a home for the first time in my life. I have my financial house in order (FICO of 687 as of last week, and yesterday I made the final payment on my car loan which should push the number up higher), so I have no doubt that I will be pre-approved for *some* kind of mortgage. The only question is how much. The single biggest monthly expense I have (aside from rent or soon-to-be-mortgage-payment) is the child support I pay to my ex-wife. The original order of support called for $450 per month eight years ago, and that number has never been modified in any legal proceeding. As a matter of honor, I have voluntarily increased that amount over the years as my salary has increased, so that I am currently paying $700 per month.

So my question is, when declaring expenses in the mortgage application should I declare the $450 I am legally obligated to, or the $700 I am currently actually paying? To be clear, I do not wish to defraud anyone. By the same token, however, I obviously want to maximize my borrowing power.
posted by Lokheed to Work & Money (3 answers total)
 
The extra $250 a month is unlikely to make much of a dent in how large a mortgage you can get; lenders want to loan you as much as they can. Anyway, you should report the $450 that you're required to pay, not the $700 that you actually pay. The extra $250 can be considered discretionary spending, and you don't have to tell the mortgage company about that. When the mortgage company verifies your assets and debts, they will ask for a copy of the child support agreement which says $450 per month.
posted by chickenmagazine at 12:24 PM on May 3, 2005


Debt, as a legal matter, is money that you are legally obligated to pay to someone. Money that you choose to pay to someone, even for very serious ethical/moral reasons, does not count as debt. So don't report it the extra $250.

Look at it this way: if everything went to hell and you ended up in bankruptcy, your creditors would force you to stop paying the extra $250 to your ex, and would take the extra $250 for themselves. As they would treat it as available money to settle your debts, so should you.
posted by Mid at 3:52 PM on May 3, 2005


I'll third the recommendation that you should just report what you legally must pay. If you want to add a bit of detail that will make the $450 more truthful, you might add (if space allows) "per child support agreement".

The basic question really is: do you expect to pay back what you borrow? That's much more important than what you put on forms.

But do keep in mind that if you're authorized to borrow (say) $500,000, there are advantages in buying a house that costs only (say) $400,000. For example, not having to eat peanut butter sandwiches every day, unless you really like them. Or not having to panic if you go the variable interest rate and rates do rise.
posted by WestCoaster at 7:48 PM on May 4, 2005


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