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DTI ratio limits after January 2014

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smith5879
New Contributor

DTI ratio limits after January 2014

From my understanding, for a mortgage to be considered qualified after January 10th, 2014 the DTI ratio must be under 43%, aside from a few exceptions, which include loans being GSE-eligible (Fannie Mae and Freddie Mac) and loans guaranteed by FHA, VA, etc. My question is, are the DTI ratio limits for Fannie Mae, Freddie Mac and FHA loans being reduced to the 43% DTI ratio of other QM's or are they staying the same or changing to something else. I'm wanting to apply for pre-approval around April, but with a 43% DTI ratio cap I won't be able to get the amount of money I'd like to borrow and will have to put off getting a mortage for about a year so I can can pay down some of my student loans. Looks like these new regulations could really screw over a lot of college graduates and people with low incomes if this DTI cap affects all these mortgage programs.

 

 

Here is a link to the CFPB's guide to the new rules:

 

http://files.consumerfinance.gov/f/201310_cfpb_qm-guide-for-lenders.pdf

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Message 1 of 15
14 REPLIES 14
ShanetheMortgageMan
Super Contributor

Re: DTI ratio limits after January 2014

No, the DTI limits for Fannie/Freddie/FHA/VA/USDA have not been reduced.  There have been a few industry groups which have started some rumors that they have been reduced through the automated underwriting system, but those claims have been proven false (I've done my own testing).

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Message 2 of 15
Amatiq
Established Member

Re: DTI ratio limits after January 2014

I am confused, I thought the DTI ratio was 36% for all debt?

Message 3 of 15
DallasLoanGuy
Super Contributor

Re: DTI ratio limits after January 2014

31 housing

43 total debt

31/43

 

but we can go over a bit with automated approval.... those are just the published guidelines

 

Retired Lender
Message 4 of 15
newmomnewme
Valued Contributor

Re: DTI ratio limits after January 2014

Usda is 29/41...that is what my broker is using...
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Message 5 of 15
Peter1142
Established Contributor

Re: DTI ratio limits after January 2014

Yes but if your score is over 660 you can go over that without much issue.

There is no such thing as a 29% housing payment here... unless you buy a tiny condo in a lousy neighborhood. Luckily no one looks at the front-end. It is routinely ignored.
Message 6 of 15
newmomnewme
Valued Contributor

Re: DTI ratio limits after January 2014

I am barely over 660, just received pre-approval from the broker, one of my conditions is "Exception Required: by underwriting manager if dti exceeds 41%"??

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Message 7 of 15
tooleman694
Valued Contributor

Re: DTI ratio limits after January 2014

Yeah I think if you have a really good file you can go up in the higher 40s. But its case by case.

Message 8 of 15
Peter1142
Established Contributor

Re: DTI ratio limits after January 2014

Yes if your DTI is over 41% then the underwriter needs to request an exemption from the USDA. But if your credit score is over 660, depending on how much over it is, this is as simple as checking a single box. I was researching this when I was looking at USDA.

Message 9 of 15
ShanetheMortgageMan
Super Contributor

Re: DTI ratio limits after January 2014


@newmomnewme wrote:

I am barely over 660, just received pre-approval from the broker, one of my conditions is "Exception Required: by underwriting manager if dti exceeds 41%"??


Each lender can have their own policy/procedure/guidelines regarding DTI's.  In your case it sounds like any debt ratio over 41% on a USDA loan needs to be reviewed by the underwriting manager.  Perhaps it's to determine if the loan has GUS approval or not, and if it does then it normally shouldn't be an issue; but if it doesn't have GUS approval then the manager may have to make a decision to grant the exception (USDA has to review it as well).

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Located in Southern California and lending in all 50 states
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