Debts Paid by Others

 In Common Questions, Qualifying for a Mortgage

If you have a debt, but are not making the payments on that debt, does that debt have to be included when calculating how much you can qualify for when applying for a mortgage? Here’s what you need to know about debts paid by others.

If you are obligated on a non-mortgage debt, but are not making the payments on that debt, we do not have to count the monthly payment against you when calculating your debt-to-income (DTI) ratio.  Some examples of non-mortgage debt include installment debts, student loans, revolving debts (credit cards), lease payments, alimony, and child support.

If you are obligated on a mortgage debt, but are not making the payments, we do not have to count the monthly payment against you if the person making the payments for you is also obligated on the mortgage debt.

Regardless of whether the debt you are not paying is a mortgage or a non-mortgage debt, we need to show that the other person has been making the payments for you for the past 12 months, and there were no delinquencies during those 12 months.  Acceptable forms of documentation include 12 months of cancelled checks or bank statements.

If the person making the payments for you is an interested party to the transaction (such as the seller or the real estate agent), then the above rules do not apply, and we must count the payment in your DTI.

There are many rules when it comes to debts paid by others. There are even more for getting a mortgage. Make sure your lender knows all those rules. Give us a call today if you need to get pre-approved for a mortgage or have any questions at all regarding mortgages or credit.

 

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