Even if your credit score is high enough to qualify for a mortgage, you either need to pay down the child support arrears balance so that it no longer appears on your credit report or you need to find a lender or mortgage program that permits the late payment balance.
The reason that this is an issue when you apply for a mortgage is because the lender is concerned that you will be required to pay down the balance in the future, which may impact your ability to pay your mortgage. Additionally, in some cases a lien may be placed on your property until the late balance is paid, which the lender may not allow.
The best case scenario is for you to pay down the child support account balance in full so that it no longer appears on your credit report. If you are financially able to do this, be sure to document any payments you make so that you can provide this information to your lender when you apply for the mortgage.
If paying off the late balance in its entirety is not an option, then you may be able to establish a payment plan to pay it off over time. This scenario may require you to increase your monthly child support payment but the lender can include the higher payment in your debt-to-income ratio.
Additionally, although the issue remains on your credit report until you pay off the balance, the lender knows that you are addressing the issue, which eliminates potential uncertainty when you apply for the loan. Specifically, if you have a payment plan in place there is less risk that a lien is placed in the property.
If these first two approaches are not feasible, I recommend that you draft a letter that explains why the late child support balance appears on your credit report and outlines the steps you have taken to correct the issue. You should also gather copies of your pay stubs or other documents that demonstrate that you have paid child support on time for the past twelve months.
You can provide the letter and pay stubs to lenders to proactively address the issue. Some lenders may permit this approach while other lenders that apply stricter qualification guidelines may not but you never know unless you ask.
Before you apply for the mortgage, I recommend that you contact multiple lenders in the table below to understand the steps that you should take to get approved, especially if the child support late payment remains on your credit report. When you speak with lenders, review your financial and credit information but do not submit your loan application until you understand the requirements that apply to your specific situation.