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Calculating DTI When Spouse is On Deed Not Note
Question:
When a spouse is on the deed to the property but not on the mortgage note, do any of the housing costs have to be considered for the spouse, not on the mortgage?
Answer:
Fannie and Freddie do not follow community property state laws for debt obligations. This means that only debts for which the borrower is personally liable should be considered. Since the borrower is on the title, a lender may still choose to add the burden of taxes and insurance to DTI as an overlay to the guideline, but Fannie’s “AskPoli®” site indicates that it is not necessary.
Please note: Freddie does not have a clear statement like this, nor does it have a similar platform for its selling guide, like AskPoli®, but the principle should remain relatively the same.
That principle is this: only debts the borrower is personally obligated to should be considered in DTI, but of course, any outcome is always contingent on the lender’s own discretion.