For some families, foster care income is a vital and reliable source of household income. But when it comes to qualifying for a mortgage, the rules for how this income can be used differ depending on whether you’re applying for a conventional loan or an FHA loan. Here’s what you need to know:
The Basics
Foster care income must be directly from a State or federally government-sponsored organization to be considered eligible income for mortgage qualification.
Conventional Loans (Fannie Mae & Freddie Mac)
- Freddie Mac: Requires a two-year history of receiving foster care income, plus proof that it will continue for at least three more years moving forward.
- Fannie Mae: Will accept a 12-month history of receipt without requiring future continuance. However, there’s a limitation: foster care income cannot represent more than 30% of the borrower’s total gross qualifying income.
FHA Loans
FHA guidelines are more flexible. They don’t specify a minimum history of receipt. Instead, the income must be shown to be stable. The key requirement is that if the foster care income is set to expire within three years of closing, it cannot be used to qualify.
Contact us and speak to a professional about getting pre-approved for a mortgage. We offer a variety of mortgage programs, including non-QM loans that can suit any situation. We look forward to helping you secure the financing that best suits your needs.