FHA DTI Limit Questions

[Anonymous]

I am currently awaiting my new home construction to be ready and I have about 2 months or less before it is ready. I was doing some research recently and came across the FHA DTI limits which have me somewhat worried.

1. I understand the DTI limits are 31%/43%, but my actual interest rate may determine if I can meet the 31%. By doing what I assume would be "worst case" for my interest rate, my front end DTI comes in just under 33% which of course is higher than the 31%. My lender has not brought this up as an issue so I am hoping there is somewhat some way around this? I am working on getting my mortgage mid score above 640 which would alleviate some stress regarding interest rates. Currently it is 619 as of today.

2. I am currently in a Ch13 BK case and have put the motion to purchase a home. What I am curious to know is if the lender will calculate my Ch13 monthly plan into my backend ratio or if the student loans ($51k which are deferred by the plan) going to be factored in? As of right now, the student loan payment (assuming 1% of the 51k balance = $510/mo) would be the higher of the two. This will leave me under 42%, but I hope they do not factor both the ch13 plan AND the student loan deferred loans.

Any help is appreciated.

[kc0039]

DTI limit for FHA is 56.999%.

[VALoanMaster]

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@Anonymous wrote:

I am currently awaiting my new home construction to be ready and I have about 2 months or less before it is ready. I was doing some research recently and came across the FHA DTI limits which have me somewhat worried.

1. I understand the DTI limits are 31%/43%, but my actual interest rate may determine if I can meet the 31%. By doing what I assume would be "worst case" for my interest rate, my front end DTI comes in just under 33% which of course is higher than the 31%. My lender has not brought this up as an issue so I am hoping there is somewhat some way around this? I am working on getting my mortgage mid score above 640 which would alleviate some stress regarding interest rates. Currently it is 619 as of today.

2. I am currently in a Ch13 BK case and have put the motion to purchase a home. What I am curious to know is if the lender will calculate my Ch13 monthly plan into my backend ratio or if the student loans ($51k which are deferred by the plan) going to be factored in? As of right now, the student loan payment (assuming 1% of the 51k balance = $510/mo) would be the higher of the two. This will leave me under 42%, but I hope they do not factor both the ch13 plan AND the student loan deferred loans.

Any help is appreciated.

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Hi LMG702,

Since you are currently in a chapter 13 BK, the lender must "down grade" your file to a manual underwrite which is going to limit your back end debt ratio depending on the lender.

For example: I have some investors that set the back end ratio to 43% max on an FHA manual underwrite & others that will allow up to 50%.

The lender will have to count your BK payment as well as the student loan payment of 1% of the balance unless you can document a lower, fully amortizing payment.

You always expect that your loan officer knows what they're doing & that they're on top your file but no one is perfect so you really should go over this with them ASAP.

Good luck.

[Anonymous]

I will reach out to him to double check. Thanks for the replies.