topic Re: Income-to-debt ratio: 36% vs 45% in Mortgage Loans

Debt-to-income (DTI) ratio: 36% vs 45%

joshall — Fri, 27 Feb 2015 02:54:38 GMT

Regarding DTI ratio, for a 5% downpayment, I was told 45% by some lenders but 36% by others is acceptable?

How would they determine the minimal payment for credit card that contribute to the back-end ratio?

Who have been approved for a mortgage based on 45% DTI ratio?

Can anyone comment on this? Thanks.

Re: Income-to-debt ratio: 36% vs 45%

DaveInAZ — Thu, 26 Feb 2015 23:56:38 GMT

@joshall wrote:
Regarding income-to-debt ratio, for a 5% downpayment, I was told 45% by some lenders but 36% by others is acceptable?

How would they determine the minimal payment for credit card that contribute to the back-end ratio?

Who have been approved for a mortgage based on 45% income-to-debt ratio?

Can anyone comment on this? Thanks.

36% total (bacck end) DTI is normally the max for a conventional mortgage, 45% is the max for an FHA loan, but an FHA loan is more expensive because of the mortgage insurance required - 1.75% of loan up front + .85% annual premium, added into your monthly payment.

For credit card debt (or even monthly usage you pay in full buy reports on your CR) they use the CC's minimum payment, usually $25 unless you have a large balance.

I've certainly never been approved for a mortgage with a 45% DTI, maybe someone else can reply to that. But the lower your DTI the stronger your app is, be frugal and try to get it down as low as possible.

BTW, the acronym the industry uses is DTI, Debt to Income ratio, not income to debt.

Re: Income-to-debt ratio: 36% vs 45%

Revelate — Fri, 27 Feb 2015 01:24:53 GMT

@DaveInAZ wrote:
@joshall wrote:
Regarding income-to-debt ratio, for a 5% downpayment, I was told 45% by some lenders but 36% by others is acceptable?

How would they determine the minimal payment for credit card that contribute to the back-end ratio?

Who have been approved for a mortgage based on 45% income-to-debt ratio?

Can anyone comment on this? Thanks.

36% total (bacck end) DTI is normally the max for a conventional mortgage, 45% is the max for an FHA loan, but an FHA loan is more expensive because of the mortgage insurance required - 1.75% of loan up front + .85% annual premium, added into your monthly payment.

For credit card debt (or even monthly usage you pay in full buy reports on your CR) they use the CC's minimum payment, usually $25 unless you have a large balance.

I've certainly never been approved for a mortgage with a 45% DTI, maybe someone else can reply to that. But the lower your DTI the stronger your app is, be frugal and try to get it down as low as possible.

BTW, the acronym the industry uses is DTI, Debt to Income ratio, not income to debt.

45% is standard with Fannie albeit with tighter underwriting standards than the 36%; both are listed in the eligilbility guide. Think FHA is now up to 50%.

Re: Income-to-debt ratio: 36% vs 45%

frugalQ — Fri, 27 Feb 2015 02:26:32 GMT

with Fannie,

As long as you are DU approve/eligible, you are subjected to the same underwriting standards whether 36% or 45%....the lower percentage is strictly a lender overlay.

I go agree that the lower your DTI, the stronger your file.

Re: Income-to-debt ratio: 36% vs 45%

joshall — Fri, 27 Feb 2015 03:00:29 GMT

Many thanks for all your insights and guidance here!

I guess this may be obvious to many of you, but what determines the DU's decision on this?

Credit score?

Cash available for down payment?

Cash left after down payment?

Available liquid?

(My credit score is around 740, with no derogatory remarks, no late payment, no auto loan, current CC debt is $2,000 out of $30,000 credit limit).

Re: Debt-to-income (DTI) ratio: 36% vs 45%

DallasLoanGuy — Fri, 27 Feb 2015 03:15:37 GMT

@joshall wrote:
Regarding DTI ratio, for a 5% downpayment, I was told 45% by some lenders but 36% by others is acceptable? i am regularly seeing 45% approved thru automated underwriting

How would they determine the minimal payment for credit card that contribute to the back-end ratio? what is on the credit report

Who have been approved for a mortgage based on 45% DTI ratio?

Can anyone comment on this? Thanks.