The VA Streamline program, or VA IRRRL, gives you the chance to refinance with very little verification. Technically, lenders don’t have to pull your credit, verify your income, or verify the value of your property. What happens if you have unpaid child support, though? Will they ever find out? Will it affect your chances of approval on the streamline program?
Technically, yes, they can find out. It’s always best to be upfront and honest with your lender. If the truth came out down the road, it could look like mortgage fraud. Just how could a lender find out? There are several ways depending on how the back child support was handled.
If there is a court order and you didn’t make good on it, your ex-spouse could make the order a lien on your home. The lender would then find out about the back child support when they order the title search. No matter the little amount of verification needed for the streamline program, a title search will always be done.
If your ex-spouse didn’t get to the point of making the order a lien, it could become a collection or judgment on your credit report. Most lenders still pull credit for the VA IRRRL even though the VA doesn’t require a score. It gives the lender an idea of your level of financial responsibility. It also lets them know what debts you have outstanding, such as child support.
Taking Care of the Child Support Arrears
The best thing you can do is take care of your child support arrears. If you can, pay off the full amount and provide your lender with the proof. This is the simplest way to still get VA IRRRL approval. With the official proof of payment in hand, the lender can ignore the obligation and you can get the loan you need.
However, since it’s likely that you have past due amounts because you couldn’t afford to pay them, you’ll have to get a payment arrangement. The arrangement must be official. In other words, it can’t just be a verbal agreement between you and your ex-spouse. Instead, you’ll have to get an official order that shows the minimum monthly payment and the due date. Once you have the payment arrangement, you’ll need proof that you make the payments on time. Making at least six payments and providing proof of those timely payments can help you get your approval.
Watch for Other Requirements
Even though you apply for the VA streamline loan, a lender that knows about your past due child support may want to verify your other liabilities. Because it is up to the lender’s discretion regarding which qualifying factors they want to see, they can require you to provide proof of your income and liabilities. This is just a way for the lender to protect themselves against future default. Even though the VA guarantees the loan, a lender doesn’t want a defaulted loan on their books in the first place.
The lender may require that they verify all aspects of your loan outside of the home’s value. It’s still a benefit for you because you don’t have to pay for the appraisal and you don’t have to worry if you are upside down on your home. If your home lost value, the lender can still refinance your loan, giving you a lower payment and helping you afford your child support payments.
Qualifying for the VA Streamline
The most important factor when applying for the VA streamline is your mortgage payment history. No matter what a lender decides to check for on your application, the mortgage payment history is required. The VA says you cannot have more than one 30-day late payment in the last 12 months on your VA loan.
In addition, you may not increase the principal amount of the loan. You may only include the outstanding principal balance of your current VA loan plus the funding fee or any closing costs. You cannot include money to pay your back child support or any other loan. You may also not receive any cash in hand.
If you have back child support, it’s best if you figure out a way to get it current. Whether you pay it in full or get a payment arrangement, you’ll need it for the VA streamline. Even though it’s not a debt that reports on your credit report, it will get there if you are delinquent on it. Do your best to bring it all current before applying for the VA IRRRL program for the fastest results.