"My Employer Is Buying My Old Home. Does That Mortgage Payment Still Count in My Debt Ratio?"

The relocation company's offer on your current home came in this morning, with a price and a signature line that has your name on it. Somewhere across the country there is a home you want to write an offer on next week. The question you keep coming back to is whether the mortgage payment on the home you are leaving is going to count against you on the new loan.

With a signed buy-out agreement from your employer's relocation plan, the payment on the home you are leaving can come out of your debt-to-income ratio, and the lender can count the buyout money as your proceeds. The lender still needs the settlement statement from the buyout at your new closing, and prepaid items are usually your money unless the relocation package says it pays them.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, licensed in fifteen states, NMLS #483943, through C2 Financial Corporation. The rules below are quoted from the guides that Fannie Mae, Freddie Mac and FHA publish, which lenders call the agency guides, and from one of my own lenders' published sheets. If your home is on the open market instead, with no employer behind the sale, how a lender counts the equity in a home that is listed but not sold is the article for that.

Does the old mortgage payment count against me when my employer buys the home?

Your debt-to-income ratio compares your monthly debts to your monthly income, and the guide to how debt-to-income ratios work explains the whole calculation. On a relocation purchase, the question is whether the full housing payment on the home you are leaving goes into the debt side. Lenders call that payment PITIA: principal, interest, taxes, insurance and any association dues.

Freddie Mac answers it directly in Section 5401.2 of its Guide, revised August 5, 2026. The payment on the home you are leaving "may be excluded from the monthly DTI ratio if the Mortgage meets the requirements in Section 4408.1(d)(iii) for Mortgages made pursuant to employee relocation programs".

Fannie Mae does not name relocation separately in its pending-sale rule. Section B3-6-06 of the Selling Guide, revised September 2, 2026, counts both payments when your current home is pending sale but will not close before your new loan. Fannie Mae will not require the current payment as long as the file holds the executed sales contract for the current home and confirmation that any financing contingencies have been cleared. An employer buyout is a contract to purchase your home, and the lender reads the agreement for those two things.

One of the wholesale lenders I work with, Luxury Mortgage Corp., writes a relocation rule of its own. Its underwriting guidelines for the Simple Access programs cover relocation benefits in two places, Section 6.3 and Section 8.9. Section 6.3 lists three conditions and ends with "If the conditions above are met, the PITIA on the existing residence can be eliminated from the debt-to-income ratio analysis." That is one lender's published rule for its own programs, which are separate from the Fannie Mae, Freddie Mac and FHA guides. The three conditions are the rest of this article.

The executed buy-out agreement

The first paper is the agreement itself, signed by everyone. Fannie Mae's Section B3-4.3-10, Anticipated Sales Proceeds, has a heading called Employee Relocation. It applies when your employer takes responsibility for paying off your existing mortgage under a relocation plan. In that case, "the lender must obtain a copy of the executed buy-out agreement to document the source of funds." The next sentence rules out two substitutes. "A photocopy of a sales contract or a listing agreement is not considered an acceptable source of verification of proceeds from the sale."

Freddie Mac lists the same document as proof of proceeds. Section 5501.3 of its Guide accepts "An executed buy-out agreement that is part of an employer relocation plan that takes responsibility for the outstanding Mortgage(s)".

FHA calls the arrangement a Relocation Guaranteed Purchase. HUD Handbook 4000.1, section II.A.4.d, lets the lender count the net proceeds, meaning the guaranteed purchase price minus the outstanding liens and expenses, as your cash to close. For documentation it asks for an "executed buyout agreement signed by all parties" and for "receipt of funds indicating that the employer or relocation service takes responsibility for the outstanding mortgage debt."

Luxury Mortgage's Section 6.3 asks for the same thing, "A copy of the executed buy-out agreement to purchase the existing residence must be provided".

So the agreement does two jobs on your new file. It documents where your down payment money is coming from, and it is the contract that lets the lender take the old payment out of your ratio. Every one of those rulebooks looks for the employer, or the relocation company it hires, taking responsibility for your existing mortgage. Some plans only promise to market the home for you, or to reimburse you after a sale to an outside buyer. Then the old payment stays in your ratio until that buyer's executed sales contract arrives and the lender's rule on financing contingencies is met.

Closing costs, points and the prepaid items in your relocation package

Relocation packages often cover closing costs or points on the new home as well, and the lenders allow that, with one line to read before you plan your cash.

Luxury Mortgage's Section 6.3 puts it this way. "Any closing costs and points that may be included in the relocation package may be used, however, the Applicant must provide funds for prepaid items unless specifically stated in the relocation package".

Prepaid items are your own expenses paid ahead of time at closing rather than fees. They include the interest from your closing day until your first regular payment period begins, and homeowners insurance paid in advance, often for a full first year. The deposit that opens your escrow account is listed right beside them on your Closing Disclosure, so read the package for both. The guide to closing costs separates them from lender and third-party fees.

On an FHA loan, the handbook's definition of Employer Assistance in section II.A.4.d includes "closing costs, prepaid items, MIP, or any portion of the MRI". Under every program, the lender reads your relocation package to see which costs it pays, and anything it does not name is your money.

If your company's help is a grant or a loan toward the down payment rather than a buyout, how a lender treats employer homebuying assistance covers what the written program terms have to say.

The settlement statement at your new closing

The third paper arrives last. Luxury Mortgage's Section 6.3 says that "At closing, a copy of the fully executed settlement statement must be provided as evidence of sale and release from liability." Section 8.9 allows "a copy of the equity advance, or a settlement statement" for the same purpose.

"Evidence of sale" means the paper showing the relocation company bought the home. "Release from liability" means the paper showing you are no longer the one who owes that mortgage. The buy-out agreement promises both of those things will happen, and the settlement statement shows they did.

Fannie Mae's timing rule in B3-4.3-10 applies here too. If the proceeds pay your down payment and closing costs, the lender must have the settlement statement on the existing home "before, or simultaneously with, the settlement on the new home". Please plan your new closing for the same day as the buyout closing, or a later day.

A buyout compared with a home that is listed or under contract

Luxury Mortgage's sheet shows the contrast inside one document. Its section on selling the home you are leaving covers an ordinary sale under a non-contingent contract. It lets the lender exclude the old PITIA "if an additional 6 months of PITIA on the home to be sold is verified." Without a contract, or with mortgage contingencies not yet released, the same section treats the old home as an investment property and includes its payment in your ratio. The one exception there takes extra reserves on both homes, at least 30% equity, and a listing at or above the value from an automated valuation the lender orders. The relocation rule in Section 8.9 lists its own three conditions, and an extra six months of PITIA is not one of them.

The documents, in order

1. Once it is signed, please provide a complete copy of your executed buy-out agreement, all pages and any addenda, please, with your signature and the relocation company's on it.
2. Please provide the full relocation benefits letter or policy from your employer, all pages, please. That is how I confirm which closing costs, points and prepaid items the package pays.
3. Please provide your most recent mortgage statement on the home you are leaving, and your home equity line statement if you have one, all pages.
4. Luxury Mortgage's Section 8.9 accepts a copy of the equity advance as closing evidence. If your relocation company gives you an equity advance, please provide a copy of it, and please provide the complete bank statement, all pages, that shows the deposit.
5. Once the buyout closes, please provide the complete, signed settlement statement, all pages, please. We will need it before or at your new closing.

Mistakes that put the old payment back in the ratio

Sending the offer letter instead of the signed agreement. Fannie Mae's B3-4.3-10 asks for the executed buy-out agreement, and says a photocopy of a sales contract or a listing agreement does not verify the proceeds. Send the signed agreement as soon as everyone has signed it.

Planning your cash around closing costs and forgetting the prepaids. A package that pays closing costs and points will often leave the prepaid items to you. If the letter does not name them, please plan to bring them.

Setting the new closing before the buyout closing. If the buyout proceeds are your down payment, Fannie Mae's rule wants the settlement statement before or at the same time as your new closing. A purchase set for the week before your buyout closes will not have it.

An illustration, so the arithmetic is visible

Numbers below are made up to show the mechanism. This is not a real client's file and it is not a quote.

Say your household qualifying income is $14,000 a month, the full payment on the home you are leaving is $2,650, the proposed payment on the new home is $3,400, and your car loan and student loan add $600.

Before the buy-out agreement is signed

New home payment                         $3,400
Payment on the home you are leaving      $2,650
Car loan and student loan                  $600
                                         ------
Total monthly debt                       $6,650
Qualifying monthly income               $14,000
Debt-to-income ratio                      47.5%

With the executed buy-out agreement in the file

New home payment                         $3,400
Payment on the home you are leaving          $0
Car loan and student loan                  $600
                                         ------
Total monthly debt                       $4,000
Qualifying monthly income               $14,000
Debt-to-income ratio                      28.6%

Now the cash side. The relocation company's buyout price is $520,000. You owe $310,000 on the first mortgage and $20,000 on a home equity line.

Estimated proceeds from the buyout

Buyout price                            $520,000
First mortgage payoff                  -$310,000
Home equity line payoff                 -$20,000
                                        --------
Estimated proceeds                      $190,000

If your agreement charges you any sale costs, those come off this figure as well.

Your package pays your closing costs and says nothing about prepaid items, so the prepaid items and the escrow deposit come out of your proceeds. The buyout closes on a Tuesday, and your new closing is the Friday after, with all three papers in the file.

Your next steps

If you would like to see your own ratio both ways, the debt ratio tool lets you enter the payment on the home you are leaving and then take it out. The rate tool prices the new purchase for your own scenario, with no credit pull and no account. You can choose the rate option that works best for you and change it later.

A relocation purchase usually comes with two other questions. The article on what changes when you buy in another state covers the closing, the taxes and the licensing. If you are keeping your job and working from the new home, the remote work letter your lender may ask for explains what your employer's confirmation should say.

Nothing here is a loan approval, a denial or a commitment to lend. The agency rules quoted come from Fannie Mae's Selling Guide sections B3-4.3-10 and B3-6-06, Freddie Mac's Guide sections 5401.2 and 5501.3, and HUD Handbook 4000.1 section II.A.4.d. The lender-specific rules come from Sections 6.3, 8.9 and 8.12 of Luxury Mortgage Corp.'s Simple Access guidelines, version 9.2, revised July 31, 2026. Other lenders write their own, and I will tell you which guideline applies to your file before we rely on it.

Common questions

Does a relocation buyout remove my old mortgage payment from my debt-to-income ratio?

It can. Freddie Mac's Guide section 5401.2 says the payment on a property pending sale under an employee relocation program may be excluded from the ratio when the loan meets the requirements in its section 4408.1(d)(iii). Fannie Mae's section B3-6-06 leaves the current payment out when the file holds the executed sales contract and confirmation that financing contingencies are cleared. Luxury Mortgage Corp.'s Simple Access guidelines state the same result once the executed buy-out agreement, the package terms and the settlement statement are in the file.

What document proves an employer buyout to a mortgage lender?

The executed buy-out agreement, signed by all parties. Fannie Mae's Selling Guide section B3-4.3-10 requires the lender to get a copy of it to document the source of funds, and says a photocopy of a sales contract or a listing agreement is not acceptable proof. FHA's Handbook 4000.1 adds receipt of funds showing the employer or relocation service takes responsibility for the outstanding mortgage debt.

Does my relocation package pay the prepaid items at closing?

Only if it says so. Luxury Mortgage Corp.'s Simple Access guidelines allow closing costs and points in a relocation package to be used, but require the client to provide funds for prepaid items unless the package specifically states it pays them. Prepaid items include the interest from closing day until your first regular payment period begins, and homeowners insurance paid in advance.

When does the lender need the settlement statement from the buyout?

At or before your new closing. Fannie Mae's section B3-4.3-10 says that when sale proceeds pay the down payment and closing costs, the lender must have the settlement statement on the existing home before, or at the same time as, the settlement on the new home. Luxury Mortgage Corp.'s guidelines ask for the fully executed settlement statement at closing as evidence of sale and release from liability.

Can I use the buyout proceeds as my down payment on the new home?

Yes. Fannie Mae's section B3-4.3-10 treats an executed buy-out agreement under an employer relocation plan as documentation of the source of funds. Freddie Mac's section 5501.3 lists it among the documents that verify proceeds from the sale of your real property. FHA's Handbook 4000.1 lets the net proceeds, meaning the guaranteed purchase price minus outstanding liens and expenses, be used as cash to close.