When an underwriter builds your debt-to-income ratio, the income side gets most of the attention. The debt side decides just as much. Every monthly obligation the guideline counts is added to the new housing payment, and the total is compared to gross income. Knowing which debts count, and at what payment, is often the difference between a file that fits and one that needs work.
The short version: if it is a recurring obligation you are legally required to pay, it probably counts. If it is a living expense you could stop or change, it generally does not. The details come from the credit report, the guideline, and the paper behind each exception.
The underwriter begins with the tri-merge credit report. Each open account on it is reviewed, and each one is either counted at a monthly payment or excluded with a documented reason. The underwriter then compares that list to the debts on your loan application and to your bank statements. A recurring payment on a bank statement that does not appear on the report, like an automatic draft to a private lender or a car loan from a small credit union that does not report, gets a question.
The payment used is usually the payment shown on the report. When the report shows no payment, or a payment the guideline will not accept, the guideline supplies a calculated payment instead. Student loans are the classic case.
Utilities, phone and internet service, groceries, gas for the car, auto and health insurance premiums, childcare, tuition you pay as you go, subscriptions, and gym memberships are living expenses. They usually stay out of the ratio unless a specific program says otherwise. VA residual income accounts for living costs in its own way, through a published table.
A useful test for borderline bills: is it on the credit report, and is it a fixed obligation with a balance owed? A phone plan is a service. A phone financed over a schedule, showing on the report with a balance, is an installment debt and counts until it is paid off or the guideline lets it go.
A credit card is counted at the required minimum payment shown on the report at the time credit was pulled. Three situations surprise people.
Paying in full every month still leaves a payment in the math if the report caught a balance. The report reflects the statement balance, and the minimum payment on that balance is what the underwriter uses.
When the report shows a balance but no minimum payment, the guideline supplies a payment, often a calculation from the balance. The method is the program's rule.
Paying a card to zero before or during the loan can remove the payment, once the underwriter can see the zero balance on an updated report, a statement, or a rapid rescore. If the cash used is part of your down payment, closing costs, or reserves, the payoff can create a different shortage. Make that decision with the loan officer, and keep the paper trail.
Charge cards that require payment in full each month, like some American Express accounts, are treated under their own rule. Some programs count the balance and some allow it to be offset by documented funds.
Installment debts with only a few payments left can sometimes be dropped from the ratio. The number of remaining payments that qualifies is different by program, and some programs still count the debt if the payment is large enough to affect your budget in the meantime. This article does not print the number, because using the wrong program's count changes a file. The way to handle it is to ask which rule the loan uses, then count the remaining payments on the latest statement.
Paying a debt down so that fewer payments remain, just to meet the rule, is something some guidelines address directly. Ask before doing it.
Leases are generally counted even when only a few payments remain.
If you co-signed a car loan for a child or a mortgage for a parent, that debt is yours in the eyes of the lender who made it, and it shows on your report. The guideline counts it unless the other person has been making the payments for the period the guideline requires, and you can prove it. The proof is usually canceled checks or bank statements from the other person's account, covering the full period the guide asks for, showing the payments came from them and were on time. A late payment on that account during the period usually ends the exclusion.
A handshake that a brother pays the truck note is the start of the conversation, and the statements from his account are the exclusion.
A divorce decree that assigns a joint debt to your former spouse can sometimes let the underwriter exclude it, depending on the program and the documents. The decree and proof of the other party's payments are typically needed.
Debts paid off with the loan, like in a cash-out refinance or debt consolidation, are excluded when the closing disclosure shows the payoffs. Debts paid off before closing with your own funds need the source of that money documented like any other asset.
Texas is a community property state. Some government programs, FHA among them, require the lender to consider a non-borrowing spouse's debts when the borrower lives in a community property state, even if that spouse is off the loan and off the title. The lender may pull the spouse's credit for that purpose. The specific rule, and which programs apply it, come from each program's guide.
Court-ordered support often does not appear on a credit report. Neither do some private loans, loans from family, buy now pay later plans, or debts to a small lender that does not report. The application asks for every obligation, and you sign it under penalty of law. Underwriters find unreported debts through pay stubs showing garnishments, bank statements showing automatic payments, the divorce decree, tax returns, and the undisclosed debt monitoring many lenders run between application and closing.
People often treat the balance and the payment as the same thing. A large student loan balance with a documented payment is counted at the payment, and a small credit card with a small payment still counts. People also leave child support off because it never shows up as a loan. A court-ordered payment counts.
The program guide and the automated findings decide each count. Agency rules and the findings are separate layers, and both apply.
Fictional example: a Fort Worth borrower's credit report shows a car loan, two credit cards and a truck loan she co-signed for her brother. The car loan and the card minimums count. The truck loan counts too, unless her brother's own bank statements show he made every payment on time for the period the guide requires; he provides them, and the underwriter excludes it. Her phone plan, utilities and insurance never enter the ratio. The final list is shorter than she feared, and every exclusion has paper behind it.
For the ratio itself, see debt-to-income. If an exclusion needs explaining, see letters of explanation, and for co-signed accounts, co-borrowers and co-signers.
If you want your credit report reviewed account by account before you apply, I can mark what counts, at what payment, and what can be documented out. Book a call, or start an application.
Links checked Oct 21, 2026.
About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.
Equal Housing Opportunity.
Last reviewed: Oct 2026