One Late Payment Can Put 5 Percent of a Balance Into Your FHA DTI

October 25, 2026

A single late payment can quietly turn a debt your DTI ignores into one it counts. That is the whole story of Section II.A.4.b.iv.K, and it is why a buyer like Anthony, a fictional FHA borrower near Batesburg-Leesville who pays an account in full each month, almost lost his purchase to a worry that the guideline may not support.

One account, two possible outcomes

For a 30-Day Account, the guideline gives the underwriter only two paths. In the first, the account is left out of the debt-to-income ratio entirely. In the second, the lender takes 5 percent of the outstanding balance and adds it to the borrower's monthly debt. Nothing in between. What decides the path is the credit report and the payment record for the past 12 months.

What the Mortgagee has to verify

The guideline opens with an obligation on the lender: "The Mortgagee must verify the Borrower paid the outstanding balance in full on every 30-Day Account each month for the past 12 months."

Read that sentence slowly. Three words carry the weight: every, each, and verify. Every 30-Day Account, not just the largest one. Each month, not an average. Verify, which means the file needs something to point to.

The exclusion itself

The next sentence is the one Anthony was hoping for: "30-Day Accounts that are paid monthly are not included in the Borrower's DTI."

Notice the condition is built into the wording. The accounts have to be paid monthly. The exclusion is not a favor and it is not a loophole. It is the guideline recognizing that an account cleared in full each month does not behave like a balance that lingers.

Why the 12-month lookback matters

The last sentence sets the penalty. If the credit report reflects any late payments in the last 12 months, the Mortgagee must utilize 5 percent of the outstanding balance as the Borrower's monthly debt to be included in the DTI.

Two details deserve attention. The word is any, so there is no allowance for a small slip. And the figure applies to the outstanding balance, so a larger balance carries a larger monthly debt in the ratio. Anthony cannot fix a late payment from eleven months ago by paying early now. He can only check what the report shows and plan around it.

A file-prep checklist

Before you submit anything, work through these steps:

1. Identify which accounts on the credit report are 30-Day Accounts.
2. Look for any late payment reported in the last 12 months on each one.
3. Gather 12 months of statements for each account.
4. Confirm the statements show the balance paid in full every month.
5. Ask how the underwriter is treating the account before the DTI is final.

That last step is the one most buyers skip. The DTI is a moving number until the account treatment is settled.

The question to put to your loan officer

Here is the wording I suggest: "Do I have any 30-Day Accounts on my credit report? Under FHA Section II.A.4.b.iv.K, are you treating them as paid monthly and leaving them out of my DTI, or are you using 5 percent of the balance?"

Then request the past 12 months of statements for each 30-Day Account showing the balance paid in full each month. If the answer is that the account is being counted at 5 percent, ask what the credit report shows and whether the late payment is accurate.

Where I come in

I am Jason Sharon, a licensed mortgage broker, and I find the path. If your DTI looks different once you apply this rule, call me at 843-LOW-RATE and I will walk through the credit report and statements with you.

Home Loans Inc - Jason Sharon, Mortgage Broker. Company NMLS #1728740, Jason Sharon NMLS #1281448. Equal Housing Opportunity.