41K salary, how much house can I afford?

[BayRaider510]

Shane, what is the max front ratio someone can go for USDA? I saw someone on this forum say 35% is usually the max but my lender said we can go past that?

[ShanetheMortgageMan]

34/46% are the highest ratios I've seen get approved through GUS lately.

[BayRaider510]

But it is possible to go over that front ratio?

[ShanetheMortgageMan]

Not without an approval through GUS.  Without GUS approval the max front end is 32%, and you'd need a 680 score and a compensating factor of one of the below 3:

• The proposed PITI (proposed housing expense) is equal to or less than the applicant’s current verified housing expense for the 12 month period preceding loan application. Verification of housing expenses may be documented on a Verification of Rent (VOR) or credit report. The VOR or credit report must include the actual payment amount due and report no late payments or delinquency for the previous 12 months. Rent or mortgage payment histories from a family member will not be considered unless 12 months of canceled checks, money order receipts, or electronic payment confirmations are provided. A history of less than 12 months will not be considered an acceptable compensating factor OR

• Accumulated savings or cash reserves available post loan closing are equal to or greater than 3 months of PITI payments. A Verification of Deposit (VOD) or two consecutive bank statements, dated within 45 days of loan application, that document the average balance held by the applicant is required. Cash on hand is not eligible for consideration as a compensating factor.

• The applicant(s) (all employed applicants) has been continuously employed with their current primary employer for a minimum of 2 years. A “Request for Verification of Employment” (VOE) (Form RD 1910-5, comparable HUD/FHA/VA or Fannie Mae form, or other equivalent), or VOEs prepared by an employment verification service (The Work Number, etc.) must be provided. This compensating factor is not applicable for self-employed applicants

[BayRaider510]

I meet the third one, been at my job over three years. Also have 740+ scores across all three bureaus. The house I want which I expect to hit the market in a few months will probably put me at a 36% front end ratio. What do you think my chances are?;

[ShanetheMortgageMan]

If your front end ratio is 36% I do not think you will get a USDA approval, because as I said the highest we've been able to get approved through GUS is 34%.  I've discussed this with around a dozen other loan officers who all say they have been capped out at 34% as well.

[BayRaider510]

What if your front end ratio is the same as your back end ratio?

Also, what about manual underwriting?

[ShanetheMortgageMan]

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@BayRaider510 wrote:
What if your front end ratio is the same as your back end ratio?

Also, what about manual underwriting?

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Doesn't matter, there appears to be hard stops in the system.

Manual underwriting is 29/41%, with potentially up to 32/44% if those compensating factors I previously listed are met.

[sports1965]

Does this apply to FHA or conventional or both? 

[ShanetheMortgageMan]

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@sports1965 wrote:

Does this apply to FHA or conventional or both? 

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Neither, we are discussing USDA loans.