Long term debts are debts that are recurring and show up on a credit report. They are calculated on the monthly minimum payment due each month to the creditor. Car payments, student loans and other installment debts (bills that have a certain length of time and then they end), if when you close, you have 12 months/payments left on them they are not considered a debt. Installment debts are the only bills that work this way.
Student loans: Whatever the monthly payment is, if they are deferred for at least 1 year from the date of done purchase, they do not count. Loans you have where there is not a payment due fee at least two years from your closing do not count.
Credit cards you pay off every month do not count; otherwise you just use the minimum payment required by the creditor. If no minimum monthly payment is required, then use 5% of whatever present balance is as the payment.
Child support is whatever the court decided you should pay – even if you don’t. If you only owe child support for 12 more months, it is not considered a debt.
Back tax payments: Whatever payment you have agreed to.
Medical bills: Whatever payment you agreed to.
These are not considered bills:
- Day Care
- School Tuition
- 401 Payroll Deductions
- Life Insurance
- Car Insurance
- Cell phone bills
- Gym payments
Any payment that does not show up on your credit report is not considered a debt to your lender.
If you have a question about what is or is not a bill email me via [email protected]