Credit and Current Monthly Debt Obligations are encompassed in Liabilities. I have covered Credit and Credit Score in other blogs (Read More). For our purposes, we are going to Focus on what Liabilities are.
Liability – A debt or obligation that the borrower is responsible for.(with all liabilities, we must know the amount owed, the debtor, the monthly minimum payment due, and the term)
- Basic Liabilities – These are what we see on most credit.
- Revolving Credit Card Debts
- Installment loans to include bank loans, car loans, Recreation Vehicle loans Personal loans, etc.
- Mortgage loans including Home Equity Lines of Credit
- Lease Payments
- Other Liabilities – These are a little out of the ordinary and may or may not show up on credit reports that we as lenders pull
- Court Ordered Payments to include
- Alimony
- Child Support
- Separate Maintenance
- Collections and Charge Offs – On conventional loans, these must be paid off, On FHA, It depends on the amount owed.
- Student Loans – Even if deferred, We must document payment and count that payment as a monthly liability
- Business Debt in Borrower’s Name – If the company has been making the payments we can document 12 months and take these out of the ratios.
- Authorized User Accounts – On this one, we have the borrower remove their name from the account and get a credit supplement proving removal
- Installment Debts with less than 10 months Owing – Generally, we can deduct from ratios
- Past Due Accounts – These must be brought Current prior to closing
- Federal Debt – delinquent must be brought current, defaulted must be paid
- Judgments and Liens – Must be paid in full as they could represent a lien against the future property purchase
- Court Ordered Payments to include
- Debt Ratios – 95% of the time, the total of all liabilities plus the new home payment can not exceed 45% of the Borrowers Gross Income.
Hope this sheds some light on the subject for you!
