USDA Direct DTI - Help! This makes no sense to me!

[Anonymous]

According to the guidlines for the Direct loan, the borrower needs to be within 29% DTI for housing costs and 41% total.

I live in Southeastern Massachusetts and housing costs are very high. The median cost for a home in this state (according to Zillow) is $378,900. Single family homes under $300,000 are rare, and they are usually sold "as is" due to short sale or foreclosure. The current maximum loan limit set by the USDA for the county that I live in is $393,000. If I purchased a house for $300,000, got the super low 1% interest rate, paid $100 per month for homeowner's insurance, and $5,000 per year in property tax, my monthly mortgage payment would be $1,500.

My monthly gross income is $3,040 (work) and $400 (child support) for a total of $3,440. My ex-husband just transfers the money into my account or gives me cash so I don't even know if I can provide proper documentation for that, but I digress. I have no credit card debt. My car payment is a ridiculous $600, but it is a joint account with my ex-boyfriend. (At the time I leased the car I didn't realize I'd soon be single and needing a place of my own, obviously.) There's still 19 months left on the lease so I'm stuck with that.

Using a DTI mortgage calculator with all of this information puts me at 46/64 DTI. But, even if I put my car payment in as $0 my DTI is just about 50/50. Am I calculating something incorrectly? If not, how is ANYONE in my area able to utilize this loan? My income (including CS) is $6,000 above the "very low income" range.

I *need* to make this loan work for my daughter's sake. She's 10 and she deserves to have a stable home. I'm trying to do everything I can to get all of my ducks in a row before I apply, but I can't make this right. Even if I got a part time job tomorrow, the income won't be included because it won't have been steady for 2 years. 

Can someone please explain to me how people in a high cost housing area are able to be both low income AND able to stay within the 29/41 guidlines??? Are these guidlines only used AFTER subsidies have been applied? Any insight is appreciated!

[NC_Mtg_Loaner]

Based on what you are stating it appears your income is too low to qualify for this program.   If you don't expect it to go up or your liabilities to go down you might want to begin researching other loan programs.

Are there any local agencies (non-profits) that provide DPA (down Payment assistance) programs?

Otherwise, I'd recommend looking to your retirement funds account to see if you have enough money saved up in order to borrow for a down payment.   I've had a couple clients' pleasantly surprised at the rapid growth and escalation within their company retirement accounts in the last couple years and typically, while it's not a good idea to borrow from your future needs (retirement funds)--it's certainly justifiable if you are using said funds to purchase a home that will allow one to generate home equity and fix their future cost of living in this capacity, imo.

[JVille]

One thing you need to immediately fix is your child support MUST be able to be tracked. One of 2 things must happen going forward. It needs to go thru the State Child Support system ie taken from his paycheck or he needs to supply you a check each and every month and you need the ALWAYS deposit it to the same account each and every month (keeping copies). The first method is preferred and saves you from needing to provide 24 bank stmts and 24 copies of checks clearing your account.
Stop being a Nice EX that support should go straight from his paycheck thru the State reporting system to your Bank acct. This makes it a piece of cake to prove to your lender at a future date. He needs to pay the exact amount required by the court each month. Not various amount because of what he purchased and is deducting from your pmt.
So fix this now, so that once the car lease drops off you can use and verify CS and no longer have a $600 lease pmt you will have an easier time.

Good luck

[Anonymous]

My income ISN'T too low for the program. According to the program guidlines to qualify as "very low income" you need to gross LESS than $35,150. I make roughly $36,000 which puts me in the "low income" category. According to statistics I've read, the average borrower using this program makes $27,000 per year. 

The problem isn't my income. It's housing costs in the state in which I live. 

My question is - how are people in MA successfully utilizing this program considering housing prices?

[NC_Mtg_Loaner]

Sorry, I'll apologize yet I wish to clarify and confirm what you've stated as well----it appears  your income isn't too low for the program, it's too low for the purchase price of the home you are looking to buy.   

[Anonymous]

That average income is probably a state average and not just your area would be my guess and you are looking at a median home price, not an average (mean) home price (former math teacher here, can be a big difference).  Consider looking at town homes or condos, because honestly at your income (very similar to mine) you can't comfortably afford a $300,000 house.  I am approved for $185,000 max and I don't feel comfortable at that amount and it is just me, no child.  It could very well be that in your area, the cost to own a home is much greater and if you are really looking to own, you may need to consider relocating to a different area.  Moving half an hour away can have drastic price differences in the housing costs.  

[svtthis]

Op if you go to the direct usda website there is a worksheet that you can download and put your figures in. It's the exact sheet usda uses when figuring out what you qualify for. It's really in depth and covers everything. I finally found it when nobody could help me here.

Under the Rural Development Staff and Loan Application Packager Resources:

You'll find Tutorial on the Worksheet for Computing Income and Maximum Loan Amount Calculator

Clink on that link and it'll download an excel sheet that you'll need to fill out. If you get stuck like I did filling it out the very next link below that is a video presentation to help you fill it out. Any questions please ask. I'm going through the process right now

[Anonymous]

I will do exactly that, thank you so much for taking the time to respond. 

I'm at work printing out the HB-1-3550 and collating/putting it in binders. Just a little light reading for the evening! 

[JVille]

Delete

[svtthis]

Op you're very Welcome! I wish you the best of luck on your journey! Keep us posted on your progress