Liabilities on a loan application are the recurring debt payments and legally enforceable obligations you owe when you apply. Lenders use them, together with your income, to calculate your debt-to-income (DTI) ratio and decide how much you can borrow. Anything you owe on a schedule — credit cards, installment loans, existing mortgages, court-ordered payments, tax debts, and loans you co-signed — belongs on the form. Ordinary living expenses do not.
Missing a debt is not a harmless oversight. The lender pulls your credit report during underwriting and compares it against what you disclosed, and any gap will at minimum stall your file.
Why Every Liability Matters
Your DTI compares total monthly debt payments to gross monthly income. If you earn $6,000 a month before taxes and owe $2,100 in combined monthly payments, your DTI is 35%. Each liability you carry raises that number and lowers the loan amount you can qualify for. Conventional mortgages processed through automated underwriting can go as high as 50% DTI, while manually underwritten conventional loans generally cap at 36% and stretch to 45% with strong credit and reserves.1Fannie Mae. Debt-to-Income Ratios FHA and VA programs set their own limits. The cleaner and more complete your liability list, the more accurately the lender can size your loan.
Revolving Debt
Revolving debt is any account you can borrow, repay, and borrow against again up to a credit limit. Credit cards are the most common example. For each card, the lender counts the minimum monthly payment — not the full balance — toward your DTI. A $10,000 balance with a $200 minimum shows up as $200 in monthly obligations.
Home equity lines of credit (HELOCs) work the same way. You owe interest only on what you have actually drawn, and the lender uses the payment tied to your current outstanding balance.
Installment Debt
Installment debt covers fixed payments over a set term: auto loans, personal loans, furniture financing, and similar. For each, disclose the required monthly payment. The remaining principal matters less than the monthly cash flow it consumes.
Student Loans
List student loans even if they are in deferment or forbearance. When your credit report shows a $0 payment, the lender substitutes a calculated figure. FHA uses 0.5% of the outstanding balance.2Department of Housing and Urban Development. Mortgagee Letter 2021-13 – Student Loan Payment Calculation of Monthly Obligation Conventional loans backed by Fannie Mae use 1%.3Fannie Mae. Monthly Debt Obligations On a $40,000 balance, that means $200 per month for FHA or $400 per month for a conventional loan counts against your DTI even if you are paying nothing right now.
Auto Leases and Buy Now, Pay Later Plans
Auto leases count. The full monthly lease payment goes on the application just like a car loan payment. Buy now, pay later (BNPL) plans are catching up: credit bureaus have announced they will begin including BNPL transactions in consumer reports, but coverage is not yet uniform across providers.4Office of the Comptroller of the Currency. Bulletin 2023-37 – Retail Lending Risk Management of Buy Now Pay Later Lending If a BNPL payment shows up on your report, the lender treats it as installment debt. Even when it doesn’t, the application asks you to disclose all debts, and active BNPL plans with remaining payments qualify.
Existing Mortgage Payments
If you already own property with a mortgage, that payment is a liability on the new application. The Uniform Residential Loan Application (Form 1003) has a dedicated section — 3a — for the creditor name, account number, monthly payment, and unpaid balance on every mortgage you owe.5Fannie Mae. Uniform Residential Loan Application Primary residence, investment property, vacation home: all of it. The full monthly payment counts, including principal, interest, taxes, insurance, and any homeowners association dues.
If you plan to sell the current property before or at closing, you can mark on the application that the mortgage will be paid off. Otherwise, the payment stays in your liability column.
Court-Ordered and Legal Obligations
Some obligations never appear on a credit report but still have to be disclosed. Section 2d of the Uniform Residential Loan Application asks specifically about alimony, child support, and separate maintenance payments.5Fannie Mae. Uniform Residential Loan Application Lenders treat these as fixed monthly outflows because failure to pay can trigger wage garnishment or contempt of court. The monthly amount reduces the income available to service your new loan.
Back taxes are another disclosure. If the IRS files a federal tax lien, the lien attaches to everything you own, including real estate and bank accounts.6Office of the Law Revision Counsel. 26 USC 6321 – Lien for Taxes A lien signals serious repayment risk and can block approval until you resolve the debt or enter a payment plan.
Unpaid court judgments count too. A monetary judgment creates a legal obligation to pay a specific amount and can lead to garnishment or asset seizure. List any active judgment along with the monthly payment amount, if one has been set.
Co-Signed Loans and Contingent Liabilities
When you co-sign someone else’s loan, you take on full legal responsibility. Federal lending rules treat co-signers, guarantors, and similar parties as contractually liable for the credit extended.7eCFR. 12 CFR Part 1002 – Equal Credit Opportunity Act (Regulation B) The full monthly payment counts as your liability, even if the primary borrower has never missed one.
Pending lawsuits where you are a defendant are contingent liabilities. They carry no fixed monthly payment, but a potential judgment could affect your ability to repay. Expect the lender to ask.
When You Can Exclude a Co-Signed Debt
For conventional loans, you can exclude a co-signed debt from your DTI if someone else has made every payment for the past 12 months with no late payments. You’ll need 12 months of canceled checks or bank statements from that person as proof.3Fannie Mae. Monthly Debt Obligations The same 12-month proof requirement applies to a mortgage where you are on the note but someone else is paying, provided that person is also obligated on the mortgage.
Debts a court has assigned to someone else, such as a loan your ex-spouse was ordered to pay in a divorce decree, can also be excluded even if the creditor hasn’t released you from the account.3Fannie Mae. Monthly Debt Obligations Bring the court order, and expect the lender to review your payment history on that debt before it was reassigned.
Loans Secured by Your Own Financial Assets
A loan against your 401(k) or another financial account, where the account itself is collateral, generally does not count toward DTI. The lender will want a copy of the loan agreement showing the financial asset secures the loan.3Fannie Mae. Monthly Debt Obligations Debt secured by cryptocurrency is the exception and must be included.
Delinquent Federal Debt Is a Hard Stop
If you are applying for an FHA, VA, or USDA loan, delinquent federal debt can block the application entirely. Federal law bars anyone in default or delinquent on federal loans or debts from getting a new federal loan guarantee.8Office of the Law Revision Counsel. 31 USC 3720B – Barring Delinquent Federal Debtors from Obtaining Federal Loans or Loan Insurance Guarantees Defaulted federal student loans, unpaid SBA loans, and other federal debts all trigger this bar.
Lenders check the Credit Alert Verification Reporting System (CAIVRS). A hit means denial on a government-backed loan until you resolve the delinquency through repayment, rehabilitation, or a payment plan.9U.S. Department of Housing and Urban Development. Credit Alert Verification Reporting System (CAIVRS)
Expenses You Do Not List
Not every recurring bill is a liability. The Uniform Residential Loan Application groups liabilities into specific categories: credit cards, installment loans, leases, mortgages, and court-ordered obligations.5Fannie Mae. Uniform Residential Loan Application Anything outside those categories stays off. You do not need to report:
- Utility bills such as electricity, gas, water, and sewer
- Cell phone and internet service
- Auto, health, or renter’s insurance premiums
- Streaming, gym memberships, and other subscriptions
- Groceries, fuel, and household supplies
These affect your budget, but they don’t involve borrowed money or a legal obligation to repay a creditor over time.
Medical debt is the common gray area. A federal rule that would have removed medical bills from credit reports was vacated by a court in 2025, so medical collections can still appear on your report and factor into the lender’s review.10Consumer Financial Protection Bureau. CFPB Finalizes Rule to Remove Medical Bills from Credit Reports If you have an active payment plan for medical debt, disclose that monthly payment.
What to Provide for Each Debt
For every liability, the Uniform Residential Loan Application asks for four things:5Fannie Mae. Uniform Residential Loan Application
- Creditor name — the company or institution you owe
- Account number — the unique identifier for the debt
- Unpaid balance — the amount that would pay the debt off in full right now
- Monthly payment — the required payment each month
Recent statements, your online banking portals, and your credit report all have this information. Pull a copy of your report before you apply. It surfaces accounts you may have forgotten and lets you confirm balances match what the lender will see. The Fair Credit Reporting Act requires credit bureaus to follow reasonable procedures for accuracy, and furnishers must correct incomplete or inaccurate information.11Office of the Law Revision Counsel. 15 USC Chapter 41 Subchapter III – Credit Reporting Agencies Dispute any error before you file the application.
What Happens If You Leave Something Off
Omitting a debt, on purpose or by accident, has real consequences. Underwriters pull your credit and compare it against your disclosures. A discrepancy delays the file while the lender investigates.
If the omission comes to light after closing, the stakes climb. Most loan agreements let the lender demand full repayment if you breached the terms, and a material misrepresentation on the application qualifies. If you can’t pay the balance on demand, foreclosure can follow.
Intentionally providing false information is a federal crime. A false statement to influence a federally related mortgage lender carries a maximum penalty of up to $1,000,000 in fines, up to 30 years in prison, or both.12Office of the Law Revision Counsel. 18 USC 1014 – Loan and Credit Applications Generally Even without prosecution, the lender can rescind the loan and report the misrepresentation, making future borrowing significantly harder.