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Max DTI ratio FHA? Lender list?

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sml1997
Valued Member

Max DTI ratio FHA? Lender list?

Does anyone know if there's a list of lenders and what their max debt to income ratios are? For FHA loans in particular. I have really good income, but I'm carrying some debt. So I'm concerned about the back end ratio with the those debts. Thanks for any help or guidance.


Starting Score: 522
Current Score: 601
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ShanetheMortgageMan
Super Contributor

Re: Max DTI ratio FHA? Lender list?

I'm not aware of any master list or anything along those lines, but FHA allows up to a 46.99% housing debt ratio and a 56.99% total debt ratio if you are able to get approved via automated underwriting.  I'd say 19 out of 20 lenders follow those limits, the remaining 1 would have an "overlay" that'd require lower debt to income ratios but those are pretty rare to find these days.

 

If your loan has to be manually underwritten for whatever reason then the maximum debt ratios are 40% housing and 50% total, requires a minimum score of 580 and two of:  cash reserves equal to 3 months of the proposed PITI payment (6 months if a 3-4 unit property),  minimal increase in housing payment (lesser of a $100 or 5% increase), significant additional income that isn't able to be used as qualifying income (such as bonus, commission, overtime income or part time employment that hasn't been received for the required amount of time), or residual income requirements met (these are the same guidelines that VA follows for residual income).

 

If you don't have two of those compensating factors when your loan has to be manually underwritten, then you can have lower debt ratios and still be able to qualify.  Below is a chart from HUD that outlines what is needed for lower debt ratios to be OK:

 

Screenshot 2023-02-18 085900.png

 

What are you estimating your debt to income ratio would be?

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Message 2 of 7
sml1997
Valued Member

Re: Max DTI ratio FHA? Lender list?

This is an outstanding and well described answer. Thank you so much Shane. Much appreciated. 


Starting Score: 522
Current Score: 601
Goal Score: 700


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Message 3 of 7
sml1997
Valued Member

Re: Max DTI ratio FHA? Lender list?

Oh, by the way to answer your last question Shane, I would expect my  ratios to be under 40/50%. Slightly. And I think I do have those additional compensation factors. My income is good, but I do have some debt which are the head wins I'm facing.


Starting Score: 522
Current Score: 601
Goal Score: 700


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Message 4 of 7
ShanetheMortgageMan
Super Contributor

Re: Max DTI ratio FHA? Lender list?

As long as your credit has been relatively clean lately then you will probably be fine to get an automated underwriting approval with debt ratios under 40/50%.  Not sure what your mortgage scores are, your signature says 601 but that could be a different FICO version... regardless, if you get your middle mortgage score up to a 620+ then that usually makes automated underwriting go easier on you.  

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 5 of 7
sml1997
Valued Member

Re: Max DTI ratio FHA? Lender list?

I probably should've clarified, but the reason why I was asking around manual underwriting is because I filed a chapter 13 bankruptcy two years ago. My middle score is 631 when I look at the mortgage scores . Not sure how to take the old numbers off my signature. Been trying. Lol.


Starting Score: 522
Current Score: 601
Goal Score: 700


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ShanetheMortgageMan
Super Contributor

Re: Max DTI ratio FHA? Lender list?

Ah, got it.  If the Ch 13 hasn't been discharged for at least 2 years then you're correct in that manual underwriting guidelines would apply.  If it's been discharged then you should only have to provide the BK petition, schedules and discharge paperwork.  If it's still an active Ch 13 BK then the BK petition, schedules, payment history and trustee approval are required.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
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