Can I exclude debts that I co-signed (contingent liability)?

Yes — if you’re a co-signer on a loan, and you’re applying for a mortgage, you may be able to exclude that debt from your debt-to-income ratio if you meet specific criteria. This situation often comes up for parents who co-signed a student or auto loan for a child.

Wondering if you can get an FHA loan with a cosigner? The answer is also yes. And depending on the loan type, co-signed debts may not count against you as long as the primary borrower has made consistent payments.

Here’s how each loan type typically handles co-signed debt:

• Fannie Mae (Conventional): You must be the co-signer (not the primary borrower) and provide proof that the primary borrower has made the last 12 months of payments. Fannie Mae’s Desktop Underwriter may allow exceptions on a case-by-case basis.
• Freddie Mac (Conventional): The co-signed debt may be excluded if the primary borrower has made the most recent 12 months of payments on time. Documentation as proof is required.
• FHA: You can exclude the co-signed debt if you’re not the primary borrower and can show 12 months of on-time payments by the main borrower. This applies under FHA excluding installment debt rules.
• USDA: May allow exclusion of co-signed debt with proper documentation of 12 months of consistent payments made by someone else.
• VA: Co-signed debts can often be excluded if you’re not responsible for the payments and the primary borrower has made 12 months of timely payments.

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To learn more about specific mortgage requirements, be sure to speak with an experienced mortgage broker.