Can you buy a home if you owe back child support?

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Child support is an obligation that counts as a debt when you qualify for a mortgage. Back child support, also called delinquent child support or child support arrearage, is more than an obligation. It also counts as a derogatory credit event and can harm your mortgage approval chances. Here’s how to deal with it.

• Not all loan programs disqualify you because of back child support
• Government-backed loans are stricter about child support arrearages
• Qualifying ratios may be the problem if the monthly payment is high

The bottom line is that you need to check your credit report to see what exactly is in there and if your FICO score is high enough to meet lender requirements. Next, use a home affordability calculator to see if you can afford a mortgage while paying your outstanding child support and current debts.

Check your credit report before panicking

As of July 2017, the three largest credit reporting agencies changed the way they report civil and tax liens, including judgments pertaining to past-due child support. The bottom line is that this black mark may not be on your credit report or impacting your credit score.

Related: When does negative information fall off my credit report?

If your credit score is high enough for you to qualify for a conventional (non-government) loan, the fact that you are making back-payments for child support won’t disqualify you in itself. You do have to disclose your current support obligation as well as the extra payment when listing your debts on your mortgage application.

Fannie Mae guidelines

Fannie Mae guidelines do not specifically address child support delinquency. They only look at credit scoring, down payment, and your debt-to-income ratios. Fannie Mae lists derogatory events that require special consideration; getting behind on child support payments is not one of them.

Here are the minimum credit scores for a Fannie Mae mortgage.

For a debt-to-income ratio of 36 percent or lower:

• 680 FICO with less than 25 percent down
• 620 FICO for a fixed loan with at least 25 percent down

For a debt-to-income ratio over 36 percent:

• 700 FICO with less than 25 percent down
• 640 FICO with more than 25 percent down

These minimum scores may be adjusted down if you have two-to-six months of reserves. “Reserves” are savings that will be available to pay your mortgage if you experience in an interruption in income. For instance, if you have $3,000 in savings after closing, and your mortgage payment is $1,000, you have three months of reserves.

Government-backed mortgages with back child support

Interestingly, a 2016 US Office of the Inspector General audit discovered that 47 of 60 files sampled contained child support delinquencies that should have barred the applicants from being insured by the FHA. So even those who should not have been able to get financing apparently had a good chance of slipping through the cracks.

But you don’t want to count on that. Especially following that audit.

Applicants cannot be approved for government-backed loans — VA, FHA or USDA programs — when they owe back child support that qualifies for “Federal administrative offset.” This offset is an optional program available to state child support enforcement authorities.

You’ll know when your state applies to put you in this program. It can do so when a noncustodial parent owes at least $25 and is at least 30 days delinquent with child support payments. If you are put in the program, you’ll receive a Pre-Offset Notice. This allows the state to collect federal payments like tax refunds to clear your debt.

The Pre-Offset Notice includes information about the Federal Tax Refund Offset and Passport Denial programs and information about how to contest the debt amount. If you did not receive a notice like this, your support balance will probably not keep you from getting a government-backed loan.

CAIVRS

If your child support arrearages have come to the attention of your state, its child support enforcement department has likely reported you to CAIVRS. This is a database covering those who have outstanding federal debt, such as delinquent student loans, and includes those with outstanding child support obligations.

You cannot get approved for a government loan as long as you’re on CAIVRS.

Related: Guide to FHA home loans

The good news, however, is that you can get off CAIVRS even before you have repaid your entire outstanding balance. You’ll likely need a written agreement with the court or the custodial parent. It should stipulate the balance owed, the due date of your payments, and how much you will pay every month.

Without such an agreement, you may have to repay the entire outstanding balance to get off the database. But if you have an agreement, and you’ve been making your payments on time, you can apply for removal from CAIVRS. You’ll have to prove that you have been making your payments.

The agency that reported you is the one you’ll have to approach about being taken out of the CAIVRS database. Your lender can’t do it, but it can help you find the source of the report and contest it.

Clearing the debt

If all else fails, one way to clear delinquent child support (and possibly lower your payment) is to pay it off with a personal loan, zero-interest credit card, or another type of financing. You’ll still have to include the payment in your debt-to-income ratio, but you’ll no longer have back child support keeping you from getting the mortgage you want.