Can I exclude an installment debt like a car loan if I have less than 10 payments left?

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In many cases you can exclude installment debts, such as car loans, from your debt-to-income ratio if there are 10 or fewer monthly payments remaining, but the exact rules depend on the type of loan you’re obtaining. This is especially important if you’re looking specifically into FHA excluding installment debt.

If you’re trying to improve your debt-to-income ratio during the mortgage approval process, this is a smart topic to bring up with your lender. While guidelines vary slightly by loan program, here’s how the main ones approach it:

• Fannie Mae (Conventional): Often allows you to leave out the debt if there are 10 or fewer payments left and the payment isn’t large enough to affect your approval. Decisions are made on a case-by-case basis.
• Freddie Mac (Conventional): Similar to Fannie Mae, you may be able to exclude the debt if it doesn’t have a big enough impact on your ability to qualify.
• FHA: You can exclude the debt only if there are 10 or fewer payments left and the monthly payment is 5% or less of your gross monthly income.
• USDA: May allow you to exclude the debt if it won’t affect your ability to repay the loan. The final decision depends on the overall financial picture.
• VA: Might allow it, depending on your full financial situation and other requirements. It’s best to talk to a lender.

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

Blue Water Mortgage is licensed in New Hampshire, Maine, Massachusetts, Connecticut, Florida and North Carolina.