What Counts as Debt on a Mortgage Application (and What Doesn't)
Your debt-to-income ratio has two halves, and most of the attention goes to the income side. The debt side looks mechanical: add up your monthly payments. It isn’t. Several common obligations are counted at a number that is not the payment you actually make, and a few that you pay every month can be left out entirely. The rules differ by loan program, which means the same borrower can have a different DTI at the same lender depending on which loan they apply for.
- Student loans with a $0 or deferred payment are not counted at $0 by most programs. Each agency has its own formula, and the spread is large.
- Some debts you pay can be excluded: installment loans nearly paid off, debts someone else has been paying for a year, and business debt your business pays.
- Alimony can be subtracted from income instead of added to debt on conventional loans. Child support cannot.
- HOA dues are not consumer debt. They are part of the housing payment, and they count whether or not they appear on your credit report.
Student loans: the biggest swing in the whole calculation
If your credit report shows a real monthly payment, every program uses it. The divergence starts when the reported payment is $0 — because you are on an income-driven plan with a $0 payment, or the loan is in deferment or forbearance. Each program then substitutes its own number.
| Program | $0 or deferred payment is counted as | $120,000 balance |
|---|---|---|
| Fannie Mae — documented $0 income-driven payment | $0 is allowed if documented | $0 / mo |
| Fannie Mae — deferred or forbearance | 1% of balance, or a documented fully amortizing payment | $1,200 / mo |
| Freddie Mac | 0.5% of balance | $600 / mo |
| FHA | 0.5% of balance when the payment is $0 | $600 / mo |
| VA | Excluded with written evidence of deferment 12+ months past closing; otherwise the greater of the reported payment or 5% of balance ÷ 12 | $0 or $500 / mo |
DTI added by the same $120,000 balance, on $8,000/month gross income.
Fifteen points of DTI is the difference between a comfortable approval and a decline. Two practical consequences follow. First, if you are in forbearance and planning to buy, getting onto an income-driven plan with a documented payment before you apply can change your qualifying number substantially. Second, the “best” program for you may be decided by how it counts your student loans, not by its rate. If you are working through the post-SAVE options, our SAVE plan guide and RAP calculator show what your payment would be.
Debts you pay that may not count
Installment loans with ≤10 payments left
Conventional loans can generally exclude them (lease payments excepted). FHA allows exclusion only if the combined payments are no more than 5% of gross monthly income.
Co-signed debts
A car loan you co-signed for a sibling can be excluded if you document 12 months of on-time payments made by them, from their account.
Business debt in your name
A truck loan or card in your name that the business pays can be excluded with 12 months of evidence the business made the payments — and the business cash flow must account for it.
30-day charge accounts
Cards with no revolving balance option (some charge cards) need no payment in DTI on conventional loans; instead you show funds to pay the balance.
None of these happen automatically. The automated underwriting system counts what is on the credit report. Each exclusion is something your loan officer has to request and document — which means you have to mention it.
Child support and alimony are not treated the same
Court-ordered child support is a monthly debt, counted at the ordered amount, if more than ten months of payments remain. Your actual payment history does not reduce it.
Alimony, separate maintenance, and equalization payments have an option on conventional loans: the payment can be deducted from your qualifying income instead of added to your debts. That sounds identical. It is not. DTI is a ratio, and shrinking the denominator moves it less than growing the numerator.
$8,000/month gross income, $2,200 housing payment, $400 other debts. As debt: $3,600 ÷ $8,000. As an income deduction: $2,600 ÷ $7,000.
Eight points from a presentation choice. If you pay alimony, ask whether your lender applies it as an income reduction.
HOA dues: housing, not consumer debt
HOA dues rarely appear on a credit report, which leads some buyers to assume they do not count. They count. On the home you are buying, dues are part of the housing payment — principal, interest, taxes, insurance, and association dues — and the lender gets the figure from the HOA or the appraisal, not your credit file. On other properties you own, dues are part of that property’s housing expense too. What a credit report shows has nothing to do with it.
The trap is a pending special assessment. If the association has voted one, it may show up in the condo questionnaire and affect both your payment and the project’s eligibility. See our note on the 2026 condo rules.
Revolving accounts with no payment listed
When a credit card shows a balance but no minimum payment on the report, lenders do not count it as $0. Conventional and FHA generally use 5% of the balance unless you document the actual required payment. A $6,000 balance becomes a $300 monthly debt. A current statement showing a $120 minimum fixes it.
Collections, judgments, and tax debt
| Item | Conventional (Fannie Mae) | FHA |
|---|---|---|
| Collection accounts | Generally need not be paid on a one-unit primary residence | Non-medical collections totaling $2,000+ must be paid, on a payment plan, or counted at 5% of balance |
| Medical collections | Generally disregarded | Excluded from the $2,000 test |
| Judgments | Must be paid off before or at closing | Must be paid, or on a documented payment plan with payments made |
| Tax debt | Paid, or an installment agreement with the payment in DTI | Paid, or an installment agreement with a payment history |
The pattern: an unresolved debt someone can enforce against you, or against the house, has to be resolved. A stale collection on a primary residence often does not.
Where guidance and practice diverge
Every exclusion above is a permission, not an instruction. A lender can decline to exclude a co-signed debt even with 12 months of documented payments, apply a higher student-loan factor than the agency, or require collections paid that the guide would let stand. These are overlays, and they are where two lenders give the same borrower two different DTIs.
Before you apply, write down every monthly obligation — including the ones that show $0 — and ask the loan officer for the debt figure they will use. Then run it through the DTI calculator yourself. If their number and yours differ, you want to find out now, not in underwriting.