Mortgage Solutions Financial-Garry Marshall

10/09/2026

09/16/2026

Will VA allow a non co borrower spouse income to be counted to lower DTI if they can show that they are making the payment that the borrower co-signed on?
Yes — but there’s an important distinction.
If you mean the Veteran is a co-signer on a debt, and the non-borrowing spouse is actually making that payment, VA guidelines can allow the co-signed debt payment to be excluded from the Veteran’s monthly obligations if the lender can document that someone else is making the payments, the account is current, and there’s no reason to believe the Veteran will have to repay it.

The key point

The spouse's income itself generally isn't simply added to the Veteran's qualifying income when the spouse isn't contractually obligated on the VA loan, particularly in a non-community-property state. VA says spousal income can be considered when the borrower is relying on it to qualify, but it must be verified as stable and reliable.
So, in the situation you're describing:
Veteran co-signed a loan for someone else.
Non-borrowing spouse is making that payment.
You can document that the spouse is making the payment.
The cleaner VA argument may be to exclude the co-signed debt payment from the Veteran's liabilities, rather than trying to use the spouse's income to "offset" the payment.
The VA Handbook specifically says a co-signed obligation may be excluded when there's evidence someone else is making the payments and there's no reason to believe the borrower will have to participate in repayment.
One caution: individual lenders/investors can have overlays or documentation requirements, so I'd want the underwriter to review the specific circumstances before counting on the exclusion.
If you want, I can also lay out exactly what documentation I would want in the file to get a VA underwriter comfortable excluding that co-signed debt.
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09/03/2026

With an FHA loan, extenuating circumstances can sometimes help explain derogatory credit, particularly when the borrower’s problems were caused by something beyond their control and the borrower has since re-established good credit.

According to FHA Handbook 4000.1, the key is documentation and showing that the circumstances were beyond the borrower’s control.

Examples of potential extenuating circumstances

Some common situations that may be considered include:

Serious illness or major medical event
Death of a wage earner in the household
Significant loss of income
Involuntary job loss or layoff
Major reduction in hours or pay
Natural disaster that caused financial hardship
Military deployment or service-related circumstances that created a financial disruption
Major uninsured or unexpected financial expense
Bankruptcy caused by circumstances outside the borrower's control

The important part is that simply having one of these events isn't automatically enough. The lender needs to establish a clear connection between the event and the derogatory credit, and determine that the situation isn't likely to recur.

Here's a big one to remember

Divorce by itself is generally NOT considered an extenuating circumstance under FHA.

However, FHA does provide a specific exception in certain foreclosure situations—for example, if the mortgage was current when the borrower divorced, the ex-spouse received the property, and the mortgage subsequently went into foreclosure.

Also, being unable to sell a previous home because of a job transfer or relocation generally does not qualify as an extenuating circumstance for the FHA foreclosure exception.

What I would want to see as a loan officer

If you're trying to make a case for a borrower, I'd build the file around:

1. What happened?
2. When did it happen?
3. How did it affect their income/finances?
4. Why did that cause the late payments/default?
5. What has changed since then?
6. Why is it unlikely to happen again?
7. What documentation proves the story?

For example, if someone lost their job and fell behind on credit cards:

Layoff letter → unemployment records → bank statements showing income loss → explanation of the late payments → new employment → 12+ months of re-established payment history.

That's much stronger than simply writing, "I lost my job and couldn't pay my bills."

One important distinction: FHA's treatment can differ depending on whether you're dealing with late payments, bankruptcy, foreclosure, short sale, or other derogatory credit, so the exact circumstance matters.