She Thought a Car Payment Would Cost Her the House. It Didn't.
Deborah started the year thinking she would never qualify for a mortgage because of a car payment sitting on her credit report. She ended the year closing on a home near Jamestown, SC, with that exact car payment excluded from her debt-to-income ratio.
What Was Actually Happening
Deborah's adult daughter had been paying that car loan for well over a year. There was no agreement that she had to. No co-signed loan, no court order, nothing legal binding her to it. She simply started covering the payment and kept doing it, month after month, because she wanted to help her mother.
The problem is that the car loan was still in Deborah's name, and it was still showing up on her credit report. Under standard debt-to-income calculations, that monthly obligation was counted against her, even though she had not personally paid a dime on it in over a year. That extra debt was enough to push her DTI past what her file could support.
The Rule Most Borrowers Never Hear About
This is a situation that comes up often, and most people assume there is nothing to be done about it. But Fannie Mae's Selling Guide addresses it directly under guideline B3-6-07:
"If a non-mortgage debt is being paid by another party without any obligation from the borrower, the debt may be excluded from the DTI calculation if the lender obtains documentation of 12 months of payments by the other party."
In plain terms: if someone else has been paying a debt that is in your name, and you had no legal obligation to pay it yourself, that debt does not have to count against you, as long as there is a documented paper trail showing 12 consecutive months of payments coming from the other person.
How This Played Out for Deborah
Once we understood the situation, the path forward was straightforward. We requested 12 consecutive months of bank statements from Deborah's daughter, statements that clearly showed the payments leaving her account and going directly to the car loan creditor. We documented it and submitted it under B3-6-07.
The underwriter excluded the car payment from Deborah's debt-to-income ratio completely. That change was what allowed her file to move forward, and it is what ultimately got her to the closing table on a home near Jamestown, SC.
What You Can Do If This Sounds Like You
If a family member, an ex-spouse, or anyone else has been paying a non-mortgage debt in your name for a year or longer, with no obligation on your part, do not assume that debt has to weigh down your application.
Pull 12 consecutive months of bank statements showing the payments coming from the other party's account directly to the creditor. Then ask your loan officer this exact question: "This debt has been paid by someone else for the last 12 months with no obligation on my part, can we exclude it under B3-6-07?"
The documentation has to be clean and consistent, but when it is, this guideline can change the entire outcome of a mortgage application, the same way it did for Deborah.
Let's Look at Your File
Every borrower's situation is different, and not every debt qualifies for exclusion. But if this sounds like your circumstances, it is worth a conversation before you assume you do not qualify.
I'm Jason Sharon, licensed mortgage broker at Home Loans Inc, serving Charleston and the surrounding region. Call 843-LOW-RATE and let's look at what your file can actually support.
Home Loans Inc - Jason Sharon, Mortgage Broker. Company NMLS #1728740, Jason Sharon NMLS #1281448. Equal Housing Opportunity.
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