The short version
Lenders look at what you owe every month, not just what you owe in total.
The most useful thing to understand is which payments count toward that figure — because the list is not what most people assume.
A mortgage is a monthly commitment, so lenders care about your capacity to handle a monthly commitment. A large total debt spread over many years is a different thing from the same total due this month.
That is why the monthly payment on each account matters more than the balance. It is also why paying down one card can change your position even if your total debt barely moves.
The usual list includes car payments, student loans, credit card minimum payments, personal loans, and any other installment debt you are carrying. Child support and separate maintenance obligations also count.
On a new purchase, the projected mortgage payment itself counts too, along with property taxes and insurance that will be collected with it. That is why the number we are testing is not just your current obligations — it is your obligations plus the new home.
Utilities, phone bills, insurance premiums, subscriptions and everyday living expenses generally do not count, because they are not debt. Rent usually does not count as an ongoing obligation once you are buying the home you will live in, though it is part of your history.
Some things count only under certain conditions — a debt with very few payments remaining, for instance, or a loan being paid by someone else. Those situations have answers, but the answers are specific.
The two most common surprises are deferred student loans and co-signed accounts. A loan in deferment still has a payment for this purpose, calculated in a standard way. And a loan you co-signed for someone else counts for you, whether or not you are the one paying it.
Neither of those is a disaster. Both are much easier to deal with when you know about them before you apply, which is why we go through this together rather than leaving it to chance.
Asked most often
Usually not. The car payment simply counts as a monthly obligation, and what matters is how your total obligations compare to your income. A manageable car payment is not a barrier.
Generally yes. If your name is on the loan, it is treated as your obligation, whether or not you are making the payments. That is worth knowing in advance, particularly if you co-signed for a family member.
They generally do, with the payment calculated in a standard way even while no payment is currently due. There are variations depending on the program and the type of loan. Worth confirming rather than assuming.
I can't determine through this chat whether another financing option will be available. James can review your circumstances and discuss what may be worth exploring.
This article is general education, not a decision about your loan. Nothing here approves, denies or selects anything, and specifics vary from person to person and change over time. James Cox, Mortgage Loan Originator, NMLS #2134648.
Your next step
Everything above is general. Your own situation has its own answer, and getting it takes about ten minutes — free, no credit pull, and nothing to sign afterward.
Call or text James Cox directly(313) 422-1327Keep reading
Debt
Debt-to-income is the comparison between what you owe each month and what you earn each month.
ReadCredit
Credit utilization is how much of your available credit you are using. It is the second-biggest factor in a credit score.
ReadDebt
The months before you apply are the most valuable months in the whole process, because they are the ones you can still act on.
Read