Simple DTI question please

[Anonymous]

I owe 8.9 payments on my car including interest. Will my car be included on anybody's DTI calculation for an FHA loan? or how does that work usually?

Thanks a bunch in advance?

[MBOhio2]

Since no one else has answered, I will jump in and try to help.

I cannot remember the exact number (anyone else know?), but I think that if you only have 2-3 payments left, then a lender can exclude in from your DTI. Otherwise, they will include it. Therefore, 8-9 payments left would be too many and a lender would include it in DTI. This may also be something that varies slightly from lender to lender (i.e. one lender may exclude with 3 months while another will only exclude with 2 months left), but I think 8-9 month left is universally too many to be excluded.

[cdtotten]

Usually if there is less than a year left, they won't include. Every lender may have different criteria.

[Anonymous]

Thanks all. I really thought I saw somewhere that a long term loan is anything longer than  year to pay off and only long term dept is included in DTI. I'm just trying to make sure because it makes the difference between 33% and 40% backside DTI for me and this mortgage.

[StartingOver10]

This is an individual lender thing. FHA will allow the lender to drop off the payment from the back end if you have less than 10 months remaining on an installment loan.

However, in our area (S Fl) some lenders will not use the payment only if you have less than 6 months remaining.

The lender can tighten FHA criteria, but not make it more loose. Naturally the lender will look for compensating factors too - don't you have reserves? That is considered a compensating factor because FHA doesn't require reserves. They look at the entire file. Based on your numbers that you posted before I don't think it will be an issue for you.

Also, if you are not under contract with an FHA case number by April 1, you can mitigate part of the new increase in MIP monthly by having a LTV of 95% rather than 96.5%.

[Anonymous]

Reserves? I think I do. I have retirement accounts that will take care of the loan if that is what you reference. In some ways I'm not in very good shape. In other ways I'm in great shape. I had a BK 9.5 years ago but not a single bad since then My scores are still higher than anything I've heard FHA ask for, according to forums anyway.

[thankfulheart]

I was recently told that it's now 6 months (used to be 10?) for USDA and FHA, but that could be regional.  I've NEVER heard of a 12 month guideline, 10 was the most generous.

[Anonymous]

Chase told me today it's nothing. No matter how many or how few payments I had left, the car would be included in my DTI. So much for that.

[StartingOver10]

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@Anonymous wrote:

Chase told me today it's nothing. No matter how many or how few payments I had left, the car would be included in my DTI. So much for that.

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Oh, that's because it's Chase.  I have a loan officer that I have been using there for years, but their criteria is on the more conservative side now. All lenders are constantly reviewing their loan criteria and rather than raise interest rates in a low interest rate market, they will tighten underwriting standards to reduce risk. When they want more deals they will loosen standards.  It is completely normal for lenders to change their criteria depending upon their current portfolio risk management. BTW, bankers are excellent at making it seem like its your issue when really its a result of standards they have adopted. These types of underwriting rules change constantly, just like a pendulum.

For the past 6 months I haven't used them much because they have tightened standards too much for some of my customers (lol..) and their mortgage closing process on a FHA takes 45 days rather than 30 days.

if you are concerned about your ratios then make application with a mortgage banker. However, from what you have posted, you seem to be in good shape, even with Chase's new criteria.  

[Anonymous]

So Chase isn't a mortgage banker?

Wells Fargo told me yesterday that anything less than 10 months for car payments won't be included in the DTI. And I don't want to wait 45 days to close either. I haven't spoken to the smaller firms that have been recommended to me in another thread yet. Sunday is 60 days since our offer went to the sellers bank, which happens to be Wells Fargo as well.