Which debts count in my debt-to-income ratio for a mortgage?

What debts usually count?

• The new home's payment, including taxes, insurance and any association dues.
• Car loans, personal loans and other installment loans with more than 10 payments left.
• Credit cards and other revolving accounts. If the credit report shows no minimum payment, the lender uses the payment on a current statement or, without one, 5 percent of the balance.
• Student loans, even in deferment. See student loans and your mortgage.
• Child support, alimony and separate maintenance you're required to pay, when payments continue more than 10 months.
• Wage garnishments with more than 10 months left.
• Payments on a home equity line of credit, and the payment on any other home you own.
• IRS installment agreements. See owing the IRS and getting a mortgage.

Why does a car lease count when a car loan might not?

Fannie Mae counts lease payments no matter how many months are left, because when a lease ends people usually sign a new lease, buy out the old one or buy a new car. An installment loan is different: it ends when it's paid off, so a loan near the end may be left out.

How does the 10-payment rule work?

Conventional (Fannie Mae): installment debt with 10 or fewer payments left doesn't have to count, though the lender should still count it if the payment is large enough to strain your budget.

FHA: closed-end debts that will be paid off within 10 months of closing can be left out only if all of those payments together are no more than 5 percent of your gross monthly income. HUD also says you can't pay a loan down just to get under 10 months.

See paying off debt to qualify before you move money around.

What doesn't count?

HUD's Handbook 4000.1 lists obligations that aren't treated as debt, including utilities, child care, commuting costs, union dues, insurance other than property insurance, retirement contributions such as 401(k) deductions, taxes that aren't delinquent, open accounts with a zero balance and medical collections. Fannie Mae doesn't count open 30-day charge accounts that are paid in full each month.

Those costs still matter for your budget, even if they don't count in the ratio.

What if someone else pays one of my debts?

Fannie Mae lets a lender leave out a non-mortgage debt you owe but someone else actually pays, such as a car loan a parent pays, with 12 months of that person's canceled checks or bank statements showing on-time payments. Debts assigned to an ex-spouse by a court order don't have to count either. See co-signed loans and your mortgage and authorized user accounts.