What Are Liabilities on a Loan Application: Debts to List and Exclude

Liabilities on a loan application are the debts and recurring financial obligations you already owe: credit cards, auto loans, student loans, existing mortgages, personal loans, vehicle leases, co-signed debts, and court-ordered payments like alimony or child support. Lenders ask about them because every required monthly payment reduces how much new debt you can take on. List them all, list them accurately, and pull your credit report before you apply so the numbers you write down match what the lender will see.

Why Your Liabilities Decide What You Can Borrow

Every liability you report feeds into your debt-to-income ratio. The lender totals your required monthly debt payments, divides by your gross monthly income, and expresses the result as a percentage. Someone earning $6,000 a month with $2,400 in combined debt payments has a 40% DTI. Most conventional mortgage lenders cap approvals somewhere around 45% to 50%, though the exact ceiling varies by program.

The practical effect is simple. Every dollar of monthly obligation you report shrinks the loan amount you can qualify for, which is why lenders care about accuracy and why you should care about which debts actually count.

Debts You Must List

Credit Cards and Other Revolving Accounts

Revolving accounts are credit lines where the balance moves month to month. Credit cards are the most common, but retail store cards and personal lines of credit also qualify. The lender uses your minimum required monthly payment, not the full balance, when calculating DTI.¹

Installment Loans

Installment loans have a fixed payment and a set payoff date. Auto loans, personal loans, and student loans all fall here. For each one, you report the monthly payment and the unpaid balance.¹

Student loans need extra care. If you’re on an income-driven repayment plan with a documented monthly payment of $0, some lenders will qualify you at that amount. If your loans are in deferment or forbearance with no payment documented, the lender may calculate a qualifying payment equal to 1% of the outstanding balance.² On a $40,000 balance, that’s an extra $400 a month working against your DTI.

Vehicle Leases

A lease payment always counts, no matter how few months are left. Lenders assume that when the lease ends you’ll start another one or finance a purchase, so the obligation is treated as permanent.²

Mortgages on Property You Already Own

Any mortgage debt you currently carry belongs on the application: your primary residence mortgage, second mortgages, and home equity lines of credit. Each entry needs the monthly payment, unpaid balance, and account number.³ These are usually the largest numbers on the page and carry the most weight in the DTI calculation.

Co-Signed Debts

If you co-signed a loan for someone else, you’re legally on the hook for the full balance if they stop paying. Lenders treat that debt as yours and include the full monthly payment in your DTI. This catches people off guard constantly. You co-signed your sibling’s car loan three years ago and forgot about it. The lender hasn’t.

There is a way out. If you can show that the other person has made every payment on time for at least the last 12 months, the lender can exclude the debt from your DTI. You’ll need 12 consecutive months of bank statements or canceled checks from the person actually making the payments, with no late payments in that stretch.²

Alimony, Child Support, and Separate Maintenance

Court-ordered alimony, child support, and separate maintenance payments you make count as liabilities. The lender will either subtract them from your qualifying income or add them to your monthly obligations.² Payments you receive are a separate matter, and you can choose whether to disclose them as income.⁴

Business Debts You Personally Guaranteed

Self-employed borrowers sometimes assume business debts stay off a personal application. They don’t, if you’re personally obligated. A debt you signed for individually, or guaranteed personally, counts as a personal liability and gets folded into your DTI.⁵ A debt that is solely the corporation’s or LLC’s obligation, with no personal guarantee from you, generally stays off.

What You Don’t Need to List

Household expenses are not liabilities. The application instructions tell you not to include phones, utilities, or insurance unless the lender specifically asks.³ Your electric bill, cell phone plan, streaming subscriptions, car insurance, health insurance premiums, and grocery spending do not belong in the liabilities section. Only debts that appear on a credit report or that you owe under a legally binding payment obligation go there.

Debts the Lender May Exclude From Your DTI

Not every debt on your credit report drags down your ratio. Four categories can often be left out of the calculation:

Installment loans with 10 or fewer monthly payments remaining. A car loan you’re about to finish typically doesn’t count as long-term debt.⁶
Open 30-day charge accounts that require the full balance to be paid every month, such as certain business charge cards.²
Co-signed debts where another party can document 12 months of on-time payments.
Debts you plan to pay off at or before closing. You may need to document where the payoff funds are coming from.

Vehicle leases are the one exception to the almost-paid-off logic. Even a lease with two months left still counts in full.²

How to Fill Out the Liabilities Section Accurately

For each debt, you’ll need four pieces of information: the creditor’s name, your account number, the current unpaid balance, and the required monthly payment.¹ The balance should reflect what you owe right now, not the original loan amount. The payment should match your statement or credit report, not a rounded guess.

Pull your credit report before you apply. You can get a free copy at annualcreditreport.com.⁷ Your report lists most of your active accounts with balances and payments. Cross-reference the numbers against your most recent statements. The lender will pull their own report during underwriting, and gaps between what you reported and what they see slow things down.

Some obligations don’t show up on a credit report. Private loans from individuals, court-ordered payments, and certain business debts are common examples. For those, use the court order, promissory note, or payment records as your source. The goal is to tie every field on the application to a document the lender can verify.

What Happens If You Leave Something Off

Accidentally underreporting a debt usually just triggers a request for more documentation. The lender spots the discrepancy on the credit pull, asks about it, and you clear it up. Processing slows, but the application survives.

Deliberately hiding debts is a different problem. Making false statements on a loan application to a federally insured institution is a federal crime carrying fines up to $1,000,000 and up to 30 years in prison.⁸ Prosecutions at that level are rare for individual borrowers, but the statute applies broadly to anyone who knowingly provides false information on an application to any federally connected lender, which covers nearly every bank, credit union, and mortgage company in the country. The safer path is to list everything and let the lender decide what counts.

1
Fannie Mae. Uniform Residential Loan Application
2
Fannie Mae. Monthly Debt Obligations
3
Fannie Mae. Instructions for Completing the Uniform Residential Loan Application
4
Consumer Financial Protection Bureau. Can a Lender or Broker Ask Me About the Alimony, Child Support, or Separate Maintenance Payments That I Receive
5
Fannie Mae. Underwriting Factors and Documentation for a Self-Employed Borrower
6
Fannie Mae. Debts Paid Off At or Prior to Closing
7
Consumer Financial Protection Bureau. What Happens When a Mortgage Lender Checks My Credit
8
Office of the Law Revision Counsel. 18 USC 1014 – Loan and Credit Applications Generally; Renewals and Discounts; Crop Insurance