The Quick Read: Support income counts toward a cash-out refinance only when it is documented, has been received in full for the most recent six months, and is expected to continue for at least three years. A lender cannot require you to list it, and you can leave it off the application. Alimony and child support paid out work the other way and lower your qualifying power. Every figure below is subject to lender guidelines and full file review, and none of it is a commitment to lend.
This article walks through how an underwriter turns a divorce decree into a monthly number, where that number breaks, and how it interacts with a buyout of your ex-spouse. The Lendmire team arranges these loans through wholesale lenders every week. The same handful of problems show up in most divorce files.
What Counts as Support Income?
Support income means alimony, child support, separate maintenance and, under the newest Fannie Mae text, equalization payments. It is one line on the loan application. It is not a loan product, and no program exists to “refinance on alimony.”
A divorce touches a refinance in two separate ways:
1. You receive support. It may count as qualifying income.
2. You pay support. It reduces your income or counts as a debt.
A third issue is separate from both: ownership. Buying out your ex means a title question and a seasoning clock. Keep that apart from the income math, because the two get confused constantly.
Key Terms Defined
Support income: Money paid to you under a legal order or agreement by a former spouse or by the other parent of your child.
Continuance: The lender’s test that the payments will keep arriving for a minimum stretch after you apply.
Debt-to-income ratio (DTI): Your monthly debts divided by your monthly income. It drives approval and which program fits.
Seasoning: The minimum time a loan or title position must exist before a cash-out refinance can use it.
Equalization payment: A lump sum that balances a property split between spouses. Lenders treat it differently from monthly support.
The Three Tests: History, Continuance, Documentation
Underwriters run three tests on support you receive. Fail one, and the income comes out of the file.
| Test | What the lender checks | Where it fails |
|---|---|---|
| Receipt history | Six months of full, regular, timely payments | Decree is recent; payments are partial or late |
| Continuance | At least three years of payments remaining | Child ages out; order has an early end date |
| Documentation | Decree, agreement or court order with amount and terms | Verbal or voluntary arrangements |
The Fannie Mae Selling Guide sets the six-month receipt rule and the three-year continuance requirement. It also lists the acceptable evidence: a divorce decree, a separation agreement if the divorce is not final, another written legal agreement or court decree, or a state law that mandates the payments. Fannie Mae has revised its wording on when the three-year clock starts, so check the current Selling Guide page for the exact language.
Fannie Mae rejects income when the payments are not the full amount or not received consistently. A payer who is only a few months into the obligation fails the history test too.
How the Monthly Number Gets Built
Underwriters generally use the documented fixed monthly amount from the decree, then confirm that bank records match it. They do not guess. They read the order, find the amount, and check that six months of deposits line up.
The steps look like this:
1. You decide whether to disclose the support. Disclosure is voluntary.
2. The underwriter reads the decree or agreement for the amount, the payment schedule and the end date or age-out event.
3. The underwriter matches that amount to six months of bank statements, cancelled checks or electronic payment records.
4. The underwriter confirms three years remain.
5. The surviving amount goes into your qualifying income, and the DTI is recalculated.
Picture a homeowner who receives child support for two children under a decree with clear monthly amounts. The older child turns 18 within two years. The lender may count the support only to the extent it lasts, and a stream that ends too soon may not count at all. Support that stops when a child ages out may not last three years.
Borrowers often assume the decree amount is the income. The lender reads the decree for how long the amount lasts.
Alimony vs. Child Support
| Factor | Alimony / separate maintenance | Child support |
|---|---|---|
| Counted if received | Yes, if tests are met | Yes, if tests are met |
| Key risk | Fixed end date or termination trigger | Child ages out inside three years |
| Extra documents | Decree or agreement | Decree plus children’s ages |
| Treatment if paid | Reduces income or adds debt, by program | Generally a debt in the ratio |
Combined orders that do not split alimony from child support cause trouble. The lender needs to see which part ends when. If your decree lumps them together, ask your attorney whether an allocation can be documented, and share the decree with your loan officer before you apply.
When you have several streams with different end dates, the lender tests each one on its own. A stream with three years left counts. A stream with eighteen months left may not. Underwriters do not average them into a blended number.
When You Pay Support
VA treats spousal support as a possible income reduction and child support as a liability on its loan analysis form. If you both receive and pay support, the amounts are netted.
Either way, the ratio that decides approval changes. For the conventional cash-out refinance, the wholesale programs generally allow a total ratio ceiling of 50% on an automated finding, with lower ceilings on manually underwritten loans, subject to lender guidelines. Paying support moves you toward that ceiling.
How Support Interacts With a Cash-Out Buyout
Support income matters here because the buyout is usually funded by new debt, and you qualify for that debt alone. Once your ex-spouse’s income leaves the file, your own income, your credit and your support receipts have to carry the loan.
Conventional cash-out refinance on a one-unit principal residence runs to 80% LTV, across the wholesale programs Lendmire works with. Two- to four-unit principal residences are lower, at 75%. A wholesale lane reaches 89.99% LTV with no mortgage insurance at a 680 score and a 50% ratio on a thirty-year fixed, primary residence, conforming balance, with its own six months of seasoning. Texas homestead cash-outs follow the state constitution’s cap, and that wholesale lane is not written there. The loan limit sets the ceiling on what you can pay your ex. Support income raises the amount you can carry. It does not raise the LTV cap. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Here is a worked scenario with no dollar figures. A homeowner keeps the house in a divorce and owes the ex-spouse half the equity. The home appraises at a value where 80% LTV covers the existing mortgage and the buyout, with room to spare. Support counted as income keeps the ratio under the ceiling. If the support fails the history test, the ratio climbs and the same loan no longer fits, even though the equity is there. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
The agency’s own seasoning rules matter too. Under Fannie Mae’s cash-out rules, the existing first mortgage must be at least 12 months old, note date to note date. At least one borrower must be on title for six months before disbursement. The 12-month rule comes from a capital markets notice and applies to note dates on or after April 1, 2023. The first-mortgage seasoning rule does not apply when buying out a co-owner under a legal agreement. Fannie Mae also treats a borrower legally awarded the property in a divorce as an owner at application.
A DTI above 45% on a Desktop Underwriter cash-out loan triggers a six-month reserves requirement under the same guide. Lendmire’s piece How a Cash-Out Refinance Lender Counts Reserves Against the New Payment covers that math.
Cash-Out or Limited Cash-Out for a Buyout?
A buyout does not have to be a true cash-out loan. Under Fannie Mae’s limited cash-out rules, a buyout of a co-owner can qualify when all parties sign a written agreement on the transfer and how proceeds are used. The property must have been jointly owned for at least 12 months before disbursement, except for a recent inheritance. The person buying out the other must qualify on their own.
The limited cash-out route runs on the rate-and-term parameters: 95% LTV on a one-unit principal residence, with mortgage insurance above 80%. That is more leverage than the 80% conventional cash-out cap. The catch is the cash. If the keeping spouse takes extra cash beyond the buyout, the loan becomes a cash-out loan and the cash-out rules apply. Which path you land on depends on who receives the money and for what. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Compare the two:
| Factor | Limited cash-out | True cash-out |
|---|---|---|
| One-unit primary LTV | 95% | 80% |
| Seasoning | 12 months joint ownership (buyout) | 12-month first mortgage; 6 months on title |
| Extra cash to borrower | Incidental only | Allowed |
| Mortgage insurance | Above 80% LTV | Not on the standard 80% lane |
Hold on to that last point. Mortgage insurance above 80% can be requested for cancellation at 80% of the original value and ends automatically at 78%, with the conditions that apply to each.
What Gets Support Excluded
Most exclusions come from a short list:
- Not six months yet. The lender must not count it. This is common right after a decree.
- Voluntary or informal payments. Without a separation agreement, Fannie Mae will not count them.
- Short continuance. A child ages out, or the order ends, inside three years.
- Lump sums. Fannie Mae says equalization payments are not steady income.
- Pending divorce. A separation agreement can serve as evidence if the divorce is not final. Without one, proposed payments do not count.
Arrears matter too. A history of missed payments breaks the “full, regular and timely” test, and the lender will see it in the bank statements.
Modification triggers also matter. If the order ends on remarriage or cohabitation, the underwriter reads that clause. A stream that can stop on short notice is harder to count than one that cannot.
Regulation B limits what a lender can do with the income. Under CFPB rules on credit discrimination, a lender must treat support as income to the extent the payments are likely to be made consistently. It cannot discount income because you are divorced or have children. It can still decline income that fails the stability and continuance tests.
If Your Payment History Is Too Short
You have four options:
1. Wait. Six months of full payments in the bank can turn excluded income into counted income.
2. Add a co-borrower. Another person’s income and credit can carry the file while the history builds.
3. Leave the support out. If your own income qualifies without it, skip disclosure. You are not required to list it.
4. Restructure the loan. A smaller loan amount or a different program may fit the ratio without the support.
None of these is a promise of approval. A lender will review the file as a whole.
Why the Decree Does Not End Your Liability
A divorce decree does not remove anyone from the existing mortgage. Both people may stay liable until the loan is refinanced, assumed with a release, or paid off. The CFPB’s research on mortgage servicing after divorce describes homeowners who reported servicers pushing a refinance when they wanted an assumption. A refinance is usually how the ex-spouse comes off the note.
Government Streamlines: The Contrast
The FHA Streamline and the VA IRRRL do not pay out cash, so they cannot fund a buyout. On a VA IRRRL, income verification is exempt when conditions are met, including that the veteran is not 30 or more days past due, per VA’s circular. On the credit-qualifying side of the ledger, support income is decisive. On a streamline, it is irrelevant. If an ex-spouse must come off an FHA loan, the credit-qualifying path may apply, so check the HUD Handbook for the current rule.
Documents to Gather
1. The final decree, separation agreement or court order showing amount and duration.
2. Six months of bank statements, cancelled checks or electronic records matching the payments.
3. For child support, proof of the children’s ages.
4. The decree page showing the end date or age-out event.
5. For a buyout, the signed written agreement on the property transfer and use of proceeds.
Share the decree with your loan officer early. Wording on end dates and modifiability changes how much of the income counts.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Drafting the Settlement With the Lender in Mind
If your decree is still being written, three habits help. State the amounts and end dates clearly. Separate alimony from child support. Write down how the buyout is paid. Your attorney decides what goes in the document. The lender’s job is to read it, and clear terms give the underwriter fewer questions.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. See Lendmire’s cash-out refinance programs to start.
Frequently Asked Questions
Do I have to list alimony or child support on a refinance application?
No. Disclosure is voluntary under Regulation B and Fannie Mae’s guide. A lender may ask about it only after telling you it need not be revealed unless you want it considered. List it if you want it counted and it meets the tests.
Can I use support income before the divorce is final?
Sometimes. Fannie Mae accepts a separation agreement as evidence when the divorce is not final. If no agreement sets the support, proposed or voluntary payments are not counted. The six-month receipt rule still applies.
What happens if my child ages out in two years?
That stream may not count. Support for a younger child with more than three years left can still count on its own.
Is a buyout payment from my ex-spouse treated as income?
No. Fannie Mae says lump-sum equalization payments are not a steady income source. A lump sum might help as cash on hand, but verify how a lender treats it before relying on it.
Does a cash-out refinance have to fund a divorce buyout?
Not always. A buyout can be treated as limited cash-out if all parties sign a written agreement and the joint-ownership requirement is met. It becomes a cash-out loan when you take extra cash beyond the buyout.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
2. Fannie Mae Selling Guide B2-1.3-03: Cash-Out Refinance Transactions
3. Fannie Mae capital markets notice, cash-out eligibility
4. Fannie Mae Selling Guide B2-1.3-02: Limited Cash-Out Refinance Transactions
5. CFPB rules on credit discrimination
6. CFPB’s research on mortgage servicing after divorce
8. HUD
This article is part of Lendmire’s Refinance series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Should a Homeowner With a Low First Mortgage Skip the Cash-Out Refinance? · Can a Builder Use Mixed Deposits to Cash Out a Paid-Off Home? · How to Cash-Out Refinance a Luxury Home After a Company Sale
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.