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With all of that pertinent info, I'm curious as to how much I could truly be approved for. The salesman for either of the builders stated they will basically cover the majority of the closing costs, and I found an awesome $15k down payment assistance program I qualify for through Wells Fargo. I understand the lender bases one's DTI off PITI and all other liabilities, but as far as the PITI goes - does that include both MIP and HOA fees? I know it includes hazard insurance and property taxes, as well as principal and interest. Property taxes for the houses I'm looking at are in the 6500-6900 range and HOA will be $900/annually. MIP should be around $2145 initially, and I intend to pay the upfront MIP with money from savings.
I'm hoping, given my great credit, degree and line of work, the lender will give me a little leeway and approve me from that range I want.
The PITI(including HOA and annual MIP) comes to $1606/month(180k house, 15k down, 3.25%, $6900/property taxes, $720/insurance)
What does everyone here think?
Real quick math without knowing all of the particulars:
Your front end DTI: $1,608 (PITI, HOA, Hazard Ins)/($45,000/12)=3,750 per month = Front end DTI of 42.8%.
Back End DTI: $1,608 + all of the debt monthly payments that you have $408/$3,750 = $1,933/$3,750 = 53.76%
So your DTI is 43/54. That's really high. I know that USDA is 29/41with some flexibilty on the back-end number depending on certain factors and FHA is 31/43.
Agree - That is a pretty tight financial situation. You may be better off 1) saving for longer and/or 2) setting your sights a little lower, say the $125-$130K range. The last thing you want to do after you get a new home is to celebrate by not being able to afford anything else.
Living on a tight debt-to-income ratio can cause serious, cascading issues when unexpected payments/needs arise, even if they seem small on their own.
Honestly even though my credit scores are lower than yours, I make about 39K and my student loans is $655 a month, and I will have about $5K in reserves by closing. Right now I am trying to get on the IBR program. I can tell you my LO told me over the phone verbally at this rate my quote was $80K, and I am trying to get the $100K preapproval letter, and I have to make certain steps towards that. I agree with some of the other posters, you might get qualified for $100K-135K, anything more might be pushing it on the DTI.
Thank you for the responses.
There is absolutely no way I would be putting myself in this situation by myself - my soon-to-be fiance and I have lived together for the last 5 years. Unfortunately, her credit is horrible so I'm going to be the only one on the mortgage. I have heard of some lenders going as high as 55% on the back-end DTI, presuming strong supporting factors. I might end up settling for a $170k house, as that would put my DTI at less than 50% - maybe I can have the homebuilder throw in some complimentary upgrades haha.
@Benjiiii wrote:Thank you for the responses.
There is absolutely no way I would be putting myself in this situation by myself - my soon-to-be fiance and I have lived together for the last 5 years. Unfortunately, her credit is horrible so I'm going to be the only one on the mortgage. I have heard of some lenders going as high as 55% on the back-end DTI, presuming strong supporting factors. I might end up settling for a $170k house, as that would put my DTI at less than 50% - maybe I can have the homebuilder throw in some complimentary upgrades haha.
It is very possible!
I have seen it done...
With her income combined with mine(she is still in school, so she doesn't make much), we are looking at a 28% front end ratio and 43% back end ratio with all her monthly obligations, as well as mine. Unfortunately, the lender won't see that, hence why I'm worrying a bit about such a high back end DTI.