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Registered: ‎04-26-2011
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Co-signing and DTI Calculation

[ Edited ]



Apologies if this has been answered. I searched the forums and was unable to find a definitive answer to this specific question.


I am in the process of refinancing a large student loan. I applied and was approved for a loan, both on my own and with a co-signer. The co-signed loan obviously has a lower interest rate. As I'm trying to take into account which option I should, I have one main consideration I'm trying to determine:


What is the effect of a co-signed loan on DTI for both the primary borrow and the co-signer? Specifically, is the DTI considered in full for both borrowers or is halved/apportioned in some way? e.g. if the payment is $800, will $800 be considered in my DTI calculations by future lenders when evaluating my credit or will it be a smaller amount than that? 


The way the underwriter explained it to me on the phone, when they looked at my credit and my co-signer's credit, they split the payment amount between me and the co-signer. However, I'm not sure if this is standard industry practice or just specific to this lender.


Please let me know if can provide more clarity to help answer this question.


Thank you in advance!

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Current Score: 620
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Posts: 7,411
Registered: ‎01-08-2013
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Re: Co-signing and DTI Calculation

I don't have the true answer to this, but this is the first I've heard of the split payment. I'll be following to see if that's really what they do.
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Registered: ‎01-15-2009
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Re: Co-signing and DTI Calculation

[ Edited ]

In my experience, the entire payment will be factored into any future DTI calculations against either borrower.


The only exception would be if you were coapplying for debt in the future, obviously both incomes would be included so in essence, the $800 payment would be split it two - as it is a percentage of your combined incomes.


However, if person A is applying for future credit on his/her own, that entire $800 payment will be factored in to DTI. The reason being - each co-borrower is EQUALLY liable for the debt, and would be held accountable for the full payment amount in the event the primary borrower defaulted.




PS: another consideration should be future financial plans, particularly mortgages. Much to read on here about how student loan debt is a HUGE factor in obtaining a mortgage, and the payment being made does not necessarily determine the amount actually calculated in DTI. For some its a show-stopper to getting a mortgage. Depending on future plans, your co-signer may want to think long and hard before making such a committment. Nothing personal Smiley Happy




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