> ## Documentation Index
> Fetch the complete documentation index at: https://docs.pylon.mortgage/llms.txt
> Use this file to discover all available pages before exploring further.

# Proof of Liability Paid Off or Paid Down

> Provide documentation that a liability has been paid off or significantly reduced so it can be treated appropriately in qualifying ratios.

## What this task is

This task collects documentation confirming that a **liability has been paid off or materially paid down** from its prior balance.
The key objective is to show that the **current outstanding balance and monthly payment** used in underwriting match the **borrower’s true post-payoff obligation**.

## When this task is required

This task is required when:

* A liability is flagged with an **exclusion reason such as “Paid Before Closing”** or similar, and
* The underwriter plans to **remove or reduce the liability** from the borrower’s qualifying obligations based on a payoff or principal reduction.

Common use cases include:

* Paying off a **credit card, personal loan, or auto loan** before or at closing.
* Reducing a balance to a point where guidelines treat the debt differently (for example, an installment loan with only a few payments remaining).

## Why this task is required

Lenders must avoid **understating the borrower’s obligations**.
Proof that the liability has been paid off or paid down ensures:

* The **current balance** and **payment** used for [DTI](/entity-models/key-concepts/dti) are accurate.
* Any **planned payoff at or before closing** is properly documented and executed.
* The loan complies with **agency, investor, and internal policy** regarding treatment of recently paid debts.

Without clear documentation, the lender may have to:

* **Include the full prior payment** in [DTI](/entity-models/key-concepts/dti), or
* Delay closing until acceptable proof is provided.

## Documents needed to resolve this task

To satisfy this task, provide:

* **Evidence of payoff or reduction**, such as:
  * A **paid-in-full letter**,
  * A **final account statement** showing a **zero balance**, or
  * An updated statement reflecting the **new, lower balance and payment**.
* If the payoff or paydown was recently made, also provide:
  * **Proof of the payment transaction**, such as bank statements, wire confirmations, or receipts showing **amount, date, and payee**.

These documents allow the underwriter to confidently reflect the **post-payoff liability position** in the borrower’s qualifying ratios.