debts paid by others

Debts paid by a third party may generally be excluded from the borrower's DTI, provided the paying party has made timely payments for the required look-back period and is not an interested party to the transaction. Documentation requirements and limited exceptions vary by agency and program.

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Guideline Requirements

Fannie Mae

Fannie Mae's Selling Guide addresses both non-mortgage and mortgage debts paid by others Fannie Mae:

• Non-mortgage debts (installment loans, student loans, revolving accounts, lease payments, alimony, child support, separate maintenance): "When a borrower is obligated on a non-mortgage debt — but is not the party who is actually repaying the debt — the lender may exclude the monthly payment from the borrower's recurring monthly obligations. This policy applies whether or not the other party is obligated on the debt, but is not applicable if the other party is an interested party to the subject transaction (such as the seller or real estate agent)." Fannie Mae
• Mortgage debts: "When a borrower is obligated on a mortgage debt — but is not the party who is actually repaying the debt — the lender may exclude the full monthly housing expense (PITIA) from the borrower's recurring monthly obligations if..." Fannie Mae
• Documentation (both debt types): "The lender must obtain the most recent 12 months' canceled checks (or bank statements) from the other party making the payments that document a 12-month payment history with no delinquent payments." Fannie Mae
• Financed property count: Even when a mortgage debt is excluded from DTI, the referenced property must still be counted in the financed property count. Fannie Mae
• Court-ordered assignment: When a court order (such as a divorce decree) assigns a debt to another party, no 12-month payment history is required to exclude it from DTI.

Freddie Mac

Freddie Mac establishes a comparison framework for contingent liabilities :

• Non-mortgage debts (installment, revolving, lease): A party other than the borrower has been making timely payments for the most recent 12 months (regardless of whether that party is obligated on the debt), AND the paying party is not an interested party to the subject real estate or mortgage transaction.
• Mortgage debts: Same 12-month timely payment requirement, PLUS the party making the mortgage payments must be obligated on the note, AND the paying party must not be an interested party.
• Note — seller evaluation: "The Seller must evaluate the validity of circumstances under which the payments are being made by another party. For example, payments on multiple student loans made by the Borrower's parent represent a common situation. However, additional investigation and documentation might be necessary when a Borrower's multiple installment and revolving debts are being paid by the Borrower's spouse who is not on the subject Mortgage."

FHA

FHA treats these obligations as contingent liabilities:

• "The Mortgagee must include monthly payments on contingent liabilities in the calculation of the Borrower's monthly obligations unless the Mortgagee verifies that there is no possibility that the debt holder will pursue debt collection against the Borrower should the other party default or the other legally obligated party has made 12 months of timely payments."
• For court-ordered divorce decrees, FHA does not require 12 months of timely payments — a copy of the court order suffices.

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Lender Overlays / Matrix

Windsor Mortgage (Fannie Mae & Freddie Mac overlays)

Mirrors both agency standards with added Freddie Mac-specific language :

• 12 months of no delinquency documented via canceled checks or bank statements
• Borrower is not using rental income from the applicable property to qualify
• Property must still be counted in multiple financed property count; reserve requirements must be met
• Freddie Mac only: "The party making the payments is not an interested party to the subject real estate or mortgage transaction."

JMAC Lending — Newport Non-Conforming

Mirrors Fannie Mae closely: "When a borrower is obligated on a non-mortgage debt but is not the party repaying the debt, the monthly payment may be excluded from the borrower's recurring monthly obligations...The most recent 12 months' canceled checks (or bank statements) must be obtained from the other party making the payments that document a 12-month payment history with no delinquent payments." JMAC Lending For mortgage debts, the party making payments must also be obligated on the note. JMAC Lending

JMAC Lending — Balboa Non-Conforming

Shortened look-back period: "Debts paid by others can be excluded from the DTI ratio if the debt is being paid in a satisfactory manner by another party for the past 6 months. Acceptable documentation would include cancelled checks or bank statements that consistently show another party making at least the past 6 payments."

New Wave Lending (AQM Program — Fannie Mae/Freddie Mac overlays)

• "Contingent liabilities can be excluded from the DTI if the borrower provides evidence that another individual/entity has made payments for 12 months (0x30). 12 months cancel checks or bank statements required."
• Divorce/court-order exception: "Any liability related to separation or divorce can be omitted if ordered by family court. Court document required. Payor cannot be an interested party to the subject transaction."

AmWest Funding — Asset Qualifier Program

"Co-signed Debts (Contingent Liability: non-mortgage debt): May be excluded from total debt if evidence showing at least current 12 months paid by other party with no delinquencies. Most recent consecutive 12 months cancelled checks or bank statements required." AmWest

Newfi Lending — Sequoia NQM (Expanded and Standard) / Rainier Matrix

"Non-mortgage debt paid by others can be excluded if evidence of 12 months of timely payments are provided showing another party is paying." Newfi Lending Newfi Lending Newfi Lending For contingent mortgage liabilities, the paying party must also be obligated on the mortgage.

Nations Direct — NonQM Underwriting Guidelines

"Generally, the primary obligor of the loan should have been making payments on the debt for at least 12 months...The liability does need to be considered as part of the borrower's recurring monthly debt obligations if: The payment history by the primary obligor cannot be sufficiently documented, or the primary obligor has a history of being delinquent." For mortgage or HELOC co-signing, the co-signor may or may not be on title.

Mega Capital — MVP Matrix

"Contingent liabilities can be excluded from DTI if the Borrower provides evidence that their business or another individual/entity has made payments for twelve (12) months (0x30). Any liability related to separation or divorce can be omitted if ordered by family court." Mega Capital's Platinum Jumbo product defers to Fannie Mae's Selling Guide for debts paid by others. Mega Capital

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Exceptions or Alternative Paths

• Shortened look-back: JMAC Balboa requires only 6 months of payment history rather than the standard 12.
• Court-ordered assignment: Fannie Mae FHA New Wave Lending and Mega Capital MVP all waive the 12-month payment history requirement when a divorce decree or family court order assigns the debt to another party; a copy of the court document is sufficient.
• Program-level prohibition — Mega Capital CES (Closed End Second): "Contingent Liabilities/Debts paid by Others: Not allowed. All borrower's obligations must be included in the qualifying DTI." Mega Capital This is the only identified program that explicitly disallows this exclusion.

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Documentation / Evidence Expectations

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Conditions or Follow-Ups

• For mortgage debts, confirm whether the paying party is obligated on the note — this is required under Freddie Mac and most lender overlays but not explicitly required under Fannie Mae for non-mortgage debts.
• For Freddie Mac files, the underwriter must affirmatively evaluate the validity of the payment arrangement, not merely collect documentation — unusual arrangements (e.g., a spouse paying multiple installment and revolving debts but not on the subject mortgage) require additional investigation.
• Confirm the applicable product matrix before applying the exclusion: the Mega Capital CES product prohibits it entirely. Mega Capital
• Rental income from the excluded property cannot be used to qualify (Windsor Mortgage overlay).