Understanding Monthly Liabilities: What Counts in Your DTI (and What Doesn’t)
Now that we’ve covered what’s included in a mortgage credit report—and how your credit score impacts loan qualification—let’s talk about liabilities. We all have them, but not all of them affect whether you qualify for a mortgage. Some debts are counted in your application, and some are not. Understanding which ones matter (and why) is key to getting approved with confidence.
When I refer to liabilities here, I mean the debts that are included in your Debt-to-Income ratio (DTI)—a key piece of the mortgage puzzle.
Quick Refresher: What Is DTI?
DTI = the percentage of your gross monthly income that goes toward monthly debt payments—and yes, that includes your future mortgage payment.
Each loan program sets its own maximum DTI limits, and those limits can shift depending on specific factors in your file. For example:
FHA loans might reduce the allowed DTI if your credit score is low.
Conventional (FNMA) loans typically max out at 50% DTI, but exceptions exist—for investment or multi-unit properties, for instance.
This is where your underwriter steps in: to confirm that your loan request fits all applicable guidelines. It's not just about rules—it’s about assessing risk.
Why Expenses Are Not Included
DTI rules don’t include everything you spend money on each month. That’s intentional.
The system already assumes that you have to pay for food, gas, insurance, utilities, and other living expenses. So those aren’t factored in. Instead, DTI focuses on monthly debts that are legally or contractually required.
Let’s break down what counts—and when.
Debts That Are Typically Included
Revolving Debt (Credit Cards)
If there’s a balance on your credit card—even if you pay it off monthly—it will show up as a liability if the mortgage credit report reflects a balance.
If a minimum payment is listed, that’s what’s used.
If not, 5% of the balance will be used.
Installment Loans (Car Loans, Personal Loans, etc.)
Fixed monthly payments on a set loan term? That’s an installment loan.
These are generally included in your DTI unless:
You’re applying for a Conventional loan and have 10 or fewer payments remaining.
You’re applying for a Government-backed loan (FHA/VA), and:
The loan has 10 or fewer payments remaining, and
The monthly payment is less than 5% of your gross monthly income.
NOTE: Some lenders even allow you to pay the loan down in advance to fall under that 10-payment threshold. Ask your lender if this strategy could be beneficial to you.
Auto Leases
Auto lease payments are always counted, even if only one or two remain. Why? Because most people lease again when the term ends. It’s assumed the payment will continue.
What About Buy Now, Pay Later (BNPL)?
This is where things get tricky.
BNPL services—like Affirm, Klarna, Temu, and others—might show up on your mortgage credit report. Whether or not they're included in your DTI depends on how they’re reported:
If listed as an installment loan, it’s treated just like any other installment loan.
If reported as revolving credit (which some store cards do), it’s treated like a credit card and included.
If not reported at all—don’t assume you're in the clear.
Here’s the catch:
Even if a BNPL account isn’t on your credit report, the underwriter is trained to look elsewhere—especially your bank statements.
If recurring payments are going to BNPL lenders, expect to be asked for documentation (terms, balance, payment amount). This debt could be added to your DTI based on what’s discovered.
Let’s Talk About Bank Statements
Yes, underwriters read every line.
They’re looking for:
Recurring payments that might indicate an undisclosed debt.
Unusual transactions or large transfers.
Payments to individuals or companies that aren’t explained by the credit report.
For example:
If you’re making regular payments to Toyota but there’s no Toyota loan listed on your credit report, the underwriter will need to ask about it.
If you co-signed a loan and the payment is coming from your account, it’s counted.
If your sibling pays the loan, and it’s always on time? Provide 12 months of your sibling’s bank account statements to exclude it from your DTI.
Helpful rule of thumb:
If you’re paying it regularly and it appears to be a debt, it is likely considered a debt in the eyes of the underwriter.
Other Commonly Missed Debts
IRS payment plans
Child support or alimony
Personal loans
Co-signed debts
Business debts paid from a personal account
NOTE: Even if a loan is technically in your business’s name, it will be counted unless you can prove:
Payments come from a business account only, and
The business lists the loan as a liability in its tax returns or financials.
What About Childcare?
Childcare is not usually included in DTI—except in some specific programs:
VA loans: Childcare costs are always included.
USDA loans: These include childcare, too, but it's handled differently.
Other loan types: Usually, childcare is not included—unless it’s court-ordered or tied to another liability.
Honesty Helps You Qualify
Here’s the bottom line:
Disclose all your debts up front.
That includes co-signed loans, informal payment plans, or anything else you pay monthly. Put it on your application. Tell your loan officer. The more accurate your info, the smoother the process.
Trying to hide debt won’t help—it’ll slow down your approval or even derail your loan.
Got Questions?
Whew—there’s a lot to unpack when it comes to monthly debt and mortgage rules, right? But don’t worry, you don’t have to figure it all out alone. If something’s unclear or you’re wondering how it applies to your situation, drop a comment, jump into the chat, or shoot me a DM. I love helping people make sense of this stuff. If you’re asking, I guarantee someone else is too. Let’s figure it out together.
Stay tuned for more insights next week—and thanks for following along.
— J.S. Whaldo
Mortgage Underwriter | Consumer Educator | Advocate for Clarity
If you’re feeling overwhelmed by all the “what counts” and “what doesn’t”—you’re not alone. This stuff can get confusing, even for seasoned pros. If you’ve got a specific question about your own situation or want to know more about something I mentioned here, don’t hesitate to ask. Drop a comment or send me a DM—I’m here to help make the process a little less intimidating and a lot more understandable.