topic Re: Underwriting: what are my chances? I have irs installment and a dti of 43.7% in Mortgage Loans

Underwriting: what are my chances? I have irs installment and a dti of 43.7%

mccallb — Thu, 12 Jun 2014 16:08:01 GMT

I've commissioned a house to be built and its due to be completed in November. Tomorrow I have my first underwriting and I'm a bit nervous. I have an installment plan with the irs for 565$ per month which is no problem for me. Its not a lien, and is not on my credit report.

However, with the house cost increase from options, etc, etc, my Total DTI is now 43.7% including the home price.

I am set up as an FHA borrower, but am saving additonal money by november to switch it to Conventional.

My dti is high because I have my wife's car and some of her bills on my credit report, but she does have a job. I can't put her on my loan though because she has a short sale.

The loan officer said (originally, at preapproval) with my credit, my debt, and my income, and the fact that my wife actually works, and the fact that I do freelance, blah blah blah, that they'll have no problem sailing me through. He said its no big deal and he's approved people up to almost 50%. However I have heard rumors that he basically says whatever it takes to get people to commit to a loan, and I would hate to get conditionally approved but with some ridiculous thing like "pay this off" or "reduce that" because its just not an option.

Any help would be greatly appreciated!

Re: Underwriting: what are my chances? I have irs installment and a dti of 43.7%

TimeToRecover — Thu, 12 Jun 2014 16:45:29 GMT

Congrats on building your home. I also am awaiting my new home to be built and due complete in November as well.

That aside. I am not an expert but I would check if the underwritting is the same for a conventional vs a FHA. I think they each have different requirements. IE FHA you can get after a short sale/foreclosure/etc sooner then you can via a conventional.

I think it would be ashame to get full approval via FHA only to find something won't go thru conventional.

But the experts will need to chime in on if I am correct. again note that my comments are just from research NOT from actual experience or knowledge.

Re: Underwriting: what are my chances? I have irs installment and a dti of 43.7%

bdhu2001 — Thu, 12 Jun 2014 23:04:13 GMT

@mccallb wrote:
I've commissioned a house to be built and its due to be completed in November. Tomorrow I have my first underwriting and I'm a bit nervous. I have an installment plan with the irs for 565$ per month which is no problem for me. Its not a lien, and is not on my credit report.

However, with the house cost increase from options, etc, etc, my Total DTI is now 43.7% including the home price.

I am set up as an FHA borrower, but am saving additonal money by november to switch it to Conventional.

My dti is high because I have my wife's car and some of her bills on my credit report, but she does have a job. I can't put her on my loan though because she has a short sale.

The loan officer said (originally, at preapproval) with my credit, my debt, and my income, and the fact that my wife actually works, and the fact that I do freelance, blah blah blah, that they'll have no problem sailing me through. He said its no big deal and he's approved people up to almost 50%. However I have heard rumors that he basically says whatever it takes to get people to commit to a loan, and I would hate to get conditionally approved but with some ridiculous thing like "pay this off" or "reduce that" because its just not an option.

Any help would be greatly appreciated!

The Debt to income ratio for conventional is 33/38 for FHA it's 31/43. Even if you save additional money, you'd have to pay new closing costs and pay down your debt to get you to max 38%. Also remember with an FHA loan, you pay at least an extra 1% of the loan for Up-front-mortgage-insurance. There's a lot of extra costs to having morgage insurance. I only mention this, because you'll need to be happy with your loan, if you aren't able to re-finance your loan latter.

Aside from all that, let them underwrigt and tell you whay is left to be done to close your loan. Based on what I found on the internet, they may ask you to pay down a lttle more of your debt or it's so close they just send it forward for funding.

Re: Underwriting: what are my chances? I have irs installment and a dti of 43.7%

mccallb — Thu, 12 Jun 2014 23:19:24 GMT

The monthly payment for FHA was going to run me about 150$ more per month than with the conventional loan when you include the extra insurance, even with the lower APR which is part of the reason I wanted to go conventional instead. I'll have the money for the conventional saved by 8/8/14 well in advance of a november close date.

As for the 33/38 for conventional, is that a hard rule? I know its a general guideline, but I didn't see where it was a set in stone rule for conventional. In fact, I've seen a lot of conventional loan lenders claiming to go much higher than 43%.

I suppose it'll come down to what the underwriter says. I can't really reduce my debt much because its in the form of the IRS debt, which is unfortunately, "pay to remove". Its not like a credit card where paying it down lowers the interest. I will pay this same amount until the date that the loan is removed.

Re: Underwriting: what are my chances? I have irs installment and a dti of 43.7%

bdhu2001 — Fri, 13 Jun 2014 01:27:05 GMT

@mccallb wrote:
The monthly payment for FHA was going to run me about 150$ more per month than with the conventional loan when you include the extra insurance, even with the lower APR which is part of the reason I wanted to go conventional instead. I'll have the money for the conventional saved by 8/8/14 well in advance of a november close date.

As for the 33/38 for conventional, is that a hard rule? I know its a general guideline, but I didn't see where it was a set in stone rule for conventional. In fact, I've seen a lot of conventional loan lenders claiming to go much higher than 43%.

I suppose it'll come down to what the underwriter says. I can't really reduce my debt much because its in the form of the IRS debt, which is unfortunately, "pay to remove". Its not like a credit card where paying it down lowers the interest. I will pay this same amount until the date that the loan is removed.

No that's the general rule, but it's one the sticklers use. As they losen up on Credit, I'm sure the 43% is the norm. However, when they decide to tighten credit, they'll back to the 38%.

Re: Underwriting: what are my chances? I have irs installment and a dti of 43.7%

mccallb — Fri, 13 Jun 2014 01:30:18 GMT

Fair enough. The loan officer told me when I got preapproved that my dti (which was only 100$ less at the time) was absolutely no problem. My worry is how trust worthy the guy is.

Also, he was with a different bank when it started, and he moved, and took me with him, so I don't know if the new bank is any different from the last. My approval letter was from the old bank.