USDA Loan and debt to income ratio help!!

[Anonymous]

Hello everyone, I am applying for my first home with the USDA loan and my area and income qualifies, my credit score is 670 from creditkarma, not sure what real scores are. I have 3 credit cards and they are about 90 percent utilization with a total debt of 4,000. I have perfect payment history with them and with my utilities. I have been at my job for about a year and seven months. Before that I was unemployed for 2 years, because I couldnt find work that paid more than my unemployment. Before that I was employed at one job for 3 years. Not sure what info matters but I am trying to give the best picture here. 

So far as I can tell the things that worry me is I have been at my job for under two years, and my debt to income ratio is 43%. If I apply will I automatically be denied since it is above 41% or will they just approve me for a loan that will make my dti ratio under 41%. I know they use your rent to figure it out, but what if your rent is going to be cheaper and that will bring your ratio down within acceptable limits?

Thank you!!

[Anonymous]

Also, I went through the USDA office, closest one to me is a couple hours away, will I have to go in person for an interview or can I do it over the phone? I was prequalified through them. I hear people talking about going through banks to get their loan. Is it better to go directly through the USDA office?

I am using the Direct loan.

[tooleman694]

I dont know about direct, but with their other program you can go 47 percent backend with a score over 660 without a problem.

[thankfulheart]

Is your back end DTI 43%? Meaning, proposed mortgage, insurance, taxes, plus monthly payment to creditors (not utilites, etc)? They do not use rent to figure DTI, but what the future PITI would be on the home.  There is also "payment shock" to consider (how much more the total house payment will be than the rent, if any).  What is your front end DTI? Debt-to-income, not including mortgage?  That also matters in the calculations.

Any chance of getting your CCs paid down?  Having those reporting low balances will help your score and the lower payments will also help DTI ratios.

[tooleman694]

I dont think they worry about payment shock with hsi scores as high as they are.

[Anonymous]

With my current rent factored in the back ratio is 43 but with 50 dollars less than I pay now my ratio would be 41. I am going to pay 400 off my credit cards this month before applying. So since I don't have a house in mind, will they just calculate how much I am eligible for and able to pay for a mortgage ? I know my piti will be less than my rent.

[Anonymous]

They dont look at the amount of your credit card balances, they are calculating your min payment due each month. Is that what you are calculating?

[Anonymous]

Yes I am using my minimum monthly payments on credit cards, plus car payment and estimating future house payment. If I dont have a house in mind how do they figure my dti ratio then?

[Anonymous]

My ratio without a house payment is 19% from what I figure. My gross monthly income divided by my minimum montly cc payments and car payment. When I add in my current rent it goes up to 43%. When I add in what I am looking to pay ( 50 bucks cheaper than current rent) then its 41%. Im just confused how I figure it out if I dont have a house in mind.

Would my job history be a problem? 1 year and 7 months at current job, was unemployed 2.5 years before that.

[thankfulheart]

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@Anonymous wrote:

My ratio without a house payment is 19% from what I figure. My gross monthly income divided by my minimum montly cc payments and car payment. When I add in my current rent it goes up to 43%. When I add in what I am looking to pay ( 50 bucks cheaper than current rent) then its 41%. Im just confused how I figure it out if I dont have a house in mind.

Would my job history be a problem? 1 year and 7 months at current job, was unemployed 2.5 years before that.

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Job history may be an issue. My LO wants 2 years at the same employer, but YMMV.  With your calculations, rent being more than what you want to purchase for, your DTI should be just fine.