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My husband and I are trying to buy a house. We are going to be starting the mortgage application this week. (we are using FHA if that matters) I know the banks look at your debt to income ratio to partially judge if you can afford a loan. It is my understanding that they look at the car loans, school bills, credit cards, etc. that are on your credit report and do not count things like utilities that are not on your credit report. My husband has a school bill that is not on our credit report. It is non-interest and is paid directly to the school each month. Will this be counted in that ratio? Are they going to question why we are sending the school a check each month? thanks!
P.s. please do not assume we are getting ourselves in “over our head” with a mortgage. The mortgage for this house (with taxes and insurance included) will be less than what we have paid in rent for the past 5 years. I was just wondering if this was something we should disclose to them/if it would matter since it is not on our credit report. etc. Thanks to those who submitted helpful answers.

6 Thoughts on Will this loan affect my mortgage application?
  1. Reply
    February 2, 2014 at 11:47 am

    They do look at bank statements and will question a steady continuous payment going out.
    For instance when we were applying for our loan, we were discussing bills and rent etc, the lender says “well I see you pay your rent 3 months ahead and you’ve been doing that for quite some time, that’s good.” Well I never told him that, he got that from reviewing our bank accounts and statements, they go back as far as a year or more.. So yes, definitely include that in your monthly debts, better to volunteer it then for them to find out you withheld info – and they will find out…

    Depending on how many payments he has left, it will be counted as part of your debts (affecting your ratio) if the debts almost paid, say only a few months left they may over look it.

  2. Reply
    Auntie Mame
    February 2, 2014 at 12:37 pm

    You do yourselves no favor by taking on a mortgage you really can’t afford. The bank wants to make you a loan, that is the way they make money. The stuff on the application is to really help insure that you are not getting in over your head. You don’t really want to go through foreclosure or bankruptcy in year or two do you? It is best to disclose all debits and monthly payments. What is the worse that can happen? Answer: they will decline your application and you’ll need to wait awhile until some of these are paid off. In this economy, with people still losing “secure” jobs, it is likely best to wait until you are absolutely sure that you are not getting in over your head.

  3. Reply
    February 2, 2014 at 1:02 pm

    YES, student loans are a part of your debtload.
    Yes they can note the regular monthly payments and ask for explanation.
    YES, the fact that you have a fixed obligation impacts how much you can afford to pay on a house loan.

    The MOST COMMON mistake of first time homebuyers is overextending themselves. You may need to wait a bit, and save up for the down payment. The MORE you put down, the easier it is to qualify, the lower your interest rate, and the LESS you pay in interest over the life of the loan.

  4. Reply
    Caveat Emptor
    February 2, 2014 at 1:02 pm

    Yes, they are going to question payments to the school. You must disclose that debt – to hide it is to commit mortgage fraud. Whether it shows on his credit report is irrelevant.

  5. Reply
    Beverly S
    February 2, 2014 at 2:01 pm

    You need to disclose it when you apply. We ask for 2 months bank statements. We look at them very closely & any payments that show up consistently are verified. Also when you sign your RESPA docs (application etc.) you are signing that all info given is correct and complete. This will be included in your DTI. Good luck!

  6. Reply
    February 2, 2014 at 2:03 pm

    If it’s not on your credit report and you don’t disclose it, I don’t think it will count. The underwriters are going to be concerned with credit/loan accounts that are on your credit report. I don’t think they asked us for our credit account information when we actually applied for our loan – they simply went off what was on our credit report.

    If you do disclose it, I don’t know whether it will count or not. If you really want to know, you might try calling a different lender and asking. This way you won’t hurt yourselves by asking your current lender if it does count, but you’ll be able to find out for sure. I think it’s going to count like a utility bill – obviously it’s something you have to pay every month but since it’s not on your credit report it’s not considered debt.

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