c. Analysis of Debts and Obligations

Deduct significant debts and obligations from total effective income when determining ability to meet the mortgage payments.  Significant debts and obligations include

·   debts and obligations with a remaining term of 10 months or more; that is, long-term obligations, and

·   accounts with a term less than 10 months that require payments so large as to cause a severe impact on the family’s resources for any period of time.

Example:  Monthly payments of $300 on an auto loan with a remaining balance of $1,500, even though it should be paid out in 5 months, would be considered significant.  The payment amount is so large as to cause a severe impact on the family’s resources during the first, most critical, months of the home loan.

Determine whether debts and obligations which do not fit the description of “significant” should be given any weight in the analysis.  They may have an impact on the applicant’s ability to provide for family living expenses.

If a married veteran wants to obtain the loan in his or her name only, the veteran may do so without regard to the spouse’s debts and obligations in a non-community property state.  However, in community property states, the spouse’s debts and obligations must be considered even if the veteran wishes to obtain the loan in his or her name only.

Debts assigned to an ex-spouse by a divorce decree will not generally be charged against a veteran-borrower.  This includes debts that are now delinquent.