Debt

Debt is the umbrella under which credit lives. Debt is what determines your credit which is why, if you have no debt, you’ll have no or low credit and you’ll have a harder time obtaining new credit when you need it.

Debt, in this case, is more than the accounts that show up on your credit report. It includes items you pay monthly that don’t report to credit, like child care costs, school tuition, and subscription services, etc. The main point where the underwriter will see these costs and ask about them to see if they’re debts that the lender needs to qualify your loan with, is on your bank statements. One of the reasons the underwriters and investors require 2 months bank statements is so they can determine if there are recurring debts that they may need to qualify your file with.

Non-purchasing spouse debt

There are 9 states where, if you’re using a government loan program (FHA, VA, USDA), your spouse’s debts will have to be considered when qualifying your loan, even if your spouse is not a borrower on the loan.

These are community property states – Washington, California, Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas & Wisconsin – and, as such, you are be responsible and liable for your spouse’s credit liability if they default or miss a payment, so lenders have to make sure you can take care of that debt along with this new house payment.

Child Support and Alimony

There is a declaration on the initial loan application that you complete asking, “Are you obligated to pay alimony, child support, or separate maintenance?” If you select “yes” for this question, this prompts your lender to ask you for further documentation in the form of a divorce decree or child support order. As stated elsewhere in the site, if there are 35 pages to your divorce decree, we’ll need all 35 pages for the file.

Now, there are other ways and documents in your loan file that will indicate to your lender that you are obligated to pay child support or alimony: your credit report (some states and counties report payments to the credit bureaus and will definitely do so if you’re in arrears) and the title report, so don’t think you’re in the clear if you answer “no” to that declaration to try to avoid having to qualify with that additional payment or provide that additional documentation.

If you are obligated to pay child support or alimony, we are required to qualify your file with the monthly payment, regardless of how much longer you are required to pay the support at the time of application.

**Important: If you’re refinancing your home loan and there is a lien showing on the title report for continued support, your ex-spouse will be required to sign a partial satisfaction of lien with the title company as affirmation that you are on-time and current with your payments to them. The title company will arrange this for you, but your ex will need to be willing to sign this document to complete the loan process.

Other housing debt

If you own a home, HOA dues and, sometimes, flood insurance are also debts that lenders need to qualify your file with, but don’t report to the credit bureaus and aren’t included in your mortgage payment reported on your credit report.

Your loan officer or processor may ask you for this information – this is why, not because we want to document the pants off you.

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Debt

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