"Does a Garnishment or a Court-Ordered Debt Count in a Mortgage Debt Ratio?"

Paragraph eleven of a draft settlement agreement gives the SUV to your client's spouse, along with the $612 monthly payment that comes with it. Your client's name stays on the loan, because nobody asked the lender to take it off. Two pay stubs later, a garnishment line shows up under deductions for a credit card balance from the marriage. Months later, your client calls to say they found a home they love.

A wage garnishment with more than ten months left to run counts in your client's debt ratio as a monthly payment. A debt a court order assigns to the other spouse can usually come out of the ratio with that order in the file. A debt someone else pays can come out with twelve months of that person's payment records.

Paying one off before closing can take it out of the ratio on a conventional loan. FHA does not let a balance be paid down to get there, and on FHA and VA a judgment that is not paid in full needs on-time payments under a plan.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, NMLS #483943, through C2 Financial Corporation, licensed in fifteen states. I wrote this for the family-law attorney, collections attorney, CPA or agent looking it up for a client.

Garnishments, court-ordered debts and debts paid by others

The Department of Labor's Fact Sheet #30 describes a wage garnishment as any legal or equitable procedure through which part of a person's earnings has to be withheld to pay a debt. It adds that most garnishments are made by court order. Put simply, a court or another authority has told the employer to hold back part of your client's pay, so the money leaves the paycheck before your client sees it.

A court-ordered assignment of debt is a decision about who pays a debt that is still in your client's name. With a debt paid by others, the lender looks at whether someone else has actually been making the payments, whether or not a court order says they should. Fannie Mae lists all three separately in Selling Guide B3-6-05, Monthly Debt Obligations (revised 08/05/2026), alongside related items. Your debt-to-income ratio, the monthly payments you owe compared with your monthly income before taxes, treats each one its own way.

What Fannie Mae calls it	How it reaches the debt ratio	What the file needs to show
Garnishments	Counted as a monthly payment when more than ten months remain	The monthly amount withheld and the months left to run
Court-Ordered Assignment of Debt	The lender is not required to count it, even when the creditor never released your client	The court order that assigns the debt, such as a divorce decree or separation agreement
Debts Paid by Others	The payment may be left out, unless the person paying is an interested party such as the seller or the real estate agent	The most recent 12 months of canceled checks or bank statements from the person paying, with no late payments
Federal Income Tax Installment Agreements	The monthly payment counts unless the balance is paid in full	The IRS agreement and proof the payments are current
Non-Applicant Accounts	Left out when documentation shows the account belongs to somebody else; counted when it is your client's	Documentation showing whose account it is

The tax agreement has its own lien rules, and buying a home while you are on an IRS payment plan covers that branch.

How is a wage garnishment counted in a mortgage debt ratio?

On a conventional loan that follows Fannie Mae's guide, B3-6-05 puts the rule in one sentence: "All garnishments with more than ten months remaining must be included" in the recurring monthly debts used to qualify.

Freddie Mac's Guide Section 5401.2 (revised 08/05/2026) tells the lender to review the application, the credit report and the pay stubs for liabilities. Every debt taken on through the Note Date has to be considered, so a garnishment on a pay stub is in plain view.

FHA is specific about support. If your client pays alimony, child support or maintenance, the lender pulls pay stubs covering at least 28 consecutive days to see whether any of it is being garnished. HUD Handbook 4000.1, section II.A.4.b (revised 04/10/2025) then has the lender count the greater of the amount in the most recent decree or the monthly amount of the garnishment. Say the decree says $900 and the employer is withholding $1,050 because back support is being caught up. On FHA, $1,050 goes in the ratio.

VA Pamphlet 26-7, Chapter 4 counts any debt with a remaining term of ten months or more. That includes a debt with exactly ten months left. If your client receives support rather than paying it, whether child support or alimony counts as income covers that side.

A divorce decree that assigns a debt to the other spouse

In most cases the decree can take that payment out of your client's ratio, and each of the four guides says so in its own words.

• Fannie Mae's B3-6-05 calls a debt assigned to another party by court order, where the creditor has not released your client, a contingent liability, and the lender is not required to count it. The payment history from before the assignment still belongs to your client.
• Freddie Mac's Section 5401.2 lets the debt come out when the obligation to make the payments has been assigned to another by court order, whether or not the creditor has released your client. The lender documents it with the appropriate pages of the separation agreement or divorce decree, and the rule covers a mortgage, too.
• FHA's handbook counts contingent liabilities unless the other party has made 12 months of timely payments. It waives that history when the liability was created by a divorce decree or other court order, and the file holds the order directing the other party to pay.
• VA's Chapter 4, Topic 5 says debts assigned to an ex-spouse by a divorce decree will not generally be charged against your client, including debts that are now delinquent.

For the attorney drafting the agreement, each rule is written around a court order that says who makes the payments. The underwriter has to match the debt in the order to an account on the credit report, so an order that names each account and the party ordered to pay it is the easiest one to read. An arrangement between former spouses that never made it into an order is read under the next rule, with twelve months of proof behind it. How a divorce affects the house and the mortgage covers the property side.

A debt someone else pays

Once the record shows that person has been paying it, the debt can usually come out of the ratio. Fannie Mae's B3-6-05 lets the lender leave out a non-mortgage debt your client owes but somebody else repays, whether or not that person is on the debt. The proof is the most recent 12 months of canceled checks or bank statements from the person paying, with no late payments. The person paying cannot be an interested party to the purchase, such as the seller or the real estate agent.

Freddie Mac asks for the same 12 months of timely payments. FHA asks for 12 months of on-time payments from the other party on a co-signed debt. On a co-signed loan, VA looks for evidence that someone else is paying and the account is current. A co-signed loan you don't pay covers that version in more detail.

Paying off a garnishment or a judgment before closing

Conventional loans. Getting an installment debt down to ten or fewer payments left is what takes it out of the ratio. Fannie Mae's section on debts paid off at or before closing (revised 04/05/2023) says installment loans paid off, or paid down to ten or fewer remaining payments, generally do not need to be counted. A payoff made only to qualify gets a careful look. Freddie Mac asks the lender to document where the payoff money came from.

An open judgment on a conventional loan. Fannie Mae's B3-5.3-09, DU Credit Report Analysis (revised 08/05/2026) covers open judgments and liens in the credit report's public records. They "must be paid off at or prior to closing." A paydown to ten months does not solve that one, and a full payoff with proof of the funds does.

FHA. HUD's handbook lets a closed-end debt be left out of the ratio if it will be paid off within ten months of closing. All such payments together also have to be no more than 5 percent of gross monthly income. The handbook then says the balance may not be paid down to meet the ten-month requirement. A judgment has to be resolved or paid by closing. It counts as resolved when your client has a payment agreement with the creditor and has made at least three months of scheduled payments on time. Those payments cannot be made ahead to reach three, and the agreed payment goes into the ratio.

VA. Chapter 4, Topic 7 of VA's pamphlet (revised August 24, 2026) says a judgment has to be paid in full or under a repayment plan with a history of timely payments, generally twelve. It also says that paying off an unpaid debt after the credit has been questioned does not change the record of how it was paid.

If the payoff money comes out of the down payment, your client may fix the ratio and come up short on cash. Should I pay off debt before buying a house runs that arithmetic, and whether you have to pay off collections to buy a house covers accounts that never reached a judgment.

Lining up the paperwork, in order

1. The order itself. When your client is ready, please have them provide the complete divorce decree or separation agreement, all pages, please, including any property settlement attached to it.
2. The pay stubs. Please have your client provide their most recent pay stubs covering at least 28 consecutive days, which is the window FHA names.
3. The creditor's statement. Please have your client provide the most recent statement from the creditor on each garnished or court-ordered debt, all pages, so the underwriter can see the balance and how many payments are left.
4. The payer's records. If someone else pays one of the debts, please have your client provide that person's canceled checks or bank statements for the most recent 12 months, all pages, showing each payment.
5. The payoff letter. If your client pays a debt off, please have them provide the creditor's payoff or satisfaction letter and the bank statement the money came out of, all pages, so underwriting can document the payoff and its source.

Common mistakes with these debts

Reading the decree as a release. The decree decides who pays, and the creditor still has your client on the account. The rules above take the payment out of the ratio only with the order in the file.

Paying an FHA debt down to ten months. It often works on a conventional loan and is ruled out on FHA.

An illustration, so the ratio is visible

Numbers below are made up to show the mechanism. They are not anyone's file.

Say your client earns $9,000 a month before taxes, with a $2,700 conventional housing payment, a $450 car payment and $120 in card minimums. A $380 garnishment has 14 months left and no open judgment behind it. The decree assigned the $612 SUV loan to the other spouse.

  STARTING POINT, EVERYTHING COUNTED
  ------------------------------------------
  Housing payment                     $2,700
  Car payment                           $450
  Credit card minimums                  $120
  Garnishment, 14 months left           $380
  SUV loan in client's name             $612
                                      ------
  Monthly debts                       $4,262
  Debt ratio on $9,000                 47.4%

  WITH THE DECREE IN THE FILE
  ------------------------------------------
  SUV loan assigned by court order        $0
  Monthly debts                       $3,650
  Debt ratio on $9,000                 40.6%

  WITH THE GARNISHMENT PAID OFF
  ------------------------------------------
  Garnishment                             $0
  Monthly debts                       $3,270
  Debt ratio on $9,000                 36.3%

In this example, putting the decree in the file lowers the monthly debts by $612 without spending any money, and paying off the garnishment lowers them by another $380. On an FHA version of the same file, only a full payoff would take the garnishment out, because FHA rules out a paydown to ten months.

Pricing the scenario

Once you know which debts will count, you can price your client's scenario in Rate & Best Fit with the right monthly payments in it. If the file has a decree, a garnishment or a judgment in it, you are welcome to call me at (843) 765-0000 before the agreement is final, and I will tell you how each line reads to an underwriter.

Nothing here is legal advice or a credit decision; the decision on any file is the lender's.

Common questions

Does a wage garnishment hurt a mortgage application?

It counts as a monthly debt. Under Fannie Mae's Selling Guide B3-6-05, a garnishment with more than ten months remaining goes into the debt-to-income ratio. An open judgment behind it is handled separately.

Does a divorce decree remove a debt from my debt-to-income ratio?

In most cases. Fannie Mae does not require the lender to count a debt assigned to another party by court order, even if the creditor never released you. Freddie Mac allows the same. FHA waives its usual 12-month payment history when a court order created the obligation, and VA does not generally charge you for debts assigned to an ex-spouse.

Should I pay off a garnishment before closing?

It depends on the program and the source. On a conventional loan, paying an installment debt down to ten or fewer payments generally takes it out of the ratio, but an open judgment has to be fully paid by closing. FHA does not allow a paydown to reach the ten-month mark. VA wants a judgment paid or under a plan with timely payments.

How does FHA count a child support garnishment?

FHA counts the larger of two numbers: the monthly amount in the most recent decree or agreement, or the monthly amount actually being garnished. The lender checks pay stubs covering at least 28 consecutive days to find it.

Does a debt my ex pays count against me if there is no court order?

Often it does not, once there is proof. Fannie Mae lets the lender exclude a non-mortgage debt somebody else repays when that person's most recent 12 months of canceled checks or bank statements show every payment on time. Freddie Mac and FHA also look for 12 months of timely payments.