Something just came up that I hadn't thought of before. We have a customer who has applied for a loan that is going through a divorce and is living with his parents, for the time being. When calculating debt to income, do we calculate it based on actual debts (thus no rent or mortgage payment) or since it is likely that soon he will be living on his own again do we add in a hypothetical rental expense?

Any thoughts?

Unless this is written into your credit policies and applied to everyone across the board, doing something one off is always a fair lending risk.

Thanks, Randy. So if this isn't addressed in our credit policy at all should we just base DTI on known debts?

That would be a bank/risk decision.

Is the bank assuming that he will be moving and encurring additional expenses? /or/ is he OK living with mom & dad? You may want to make your assumption based on applicant's response, and use it in all cases. This may include still in school and living in a dorm; moving in with friends (or boy/girl friend), just relocated and staying with relatives for the time being, etc.