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Question for lenders / brokers / experienced folks on DTI percentages

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BallBounces
Valued Contributor

Question for lenders / brokers / experienced folks on DTI percentages

Any advantage (in terms of approvals, or rates, or navigating the UW process I suppose) of having a back end of ratio 18%  vs 24%  ?  If it matters, assume an unimpressive mid score of 700 ish.

 

 

(For context in the very early stages of budget setting, debt consolidation, determining DP,  etc.    )

050719:     
021924:     


FICO 08 scores listed and are stagnated until multiple derogatory items expire over the next two years.
Message 1 of 8
7 REPLIES 7
CreditFun
Regular Contributor

Re: Question for lenders / brokers / experienced folks on DTI percentages

In a vaccum, all things equal, DTI's biggest impact would likely be on MI pricing.

Message 2 of 8
BallBounces
Valued Contributor

Re: Question for lenders / brokers / experienced folks on DTI percentages


@CreditFun wrote:

In a vaccum, all things equal, DTI's biggest impact would likely be on MI pricing.


Hmm. I had not considered this, and trying to wrap my head aroud how DTI itself would impact MI pricing.

 

So set up a hypotheticalfor me @CreditFun  :  Lets say the DTI calculation changes only because two identical people are deciding  whether to cosign or just have one person on the loan.  With two buyers, DTI is 18%.  With One it is 30%, but in both cases 10% is being put down and mid scores don't change.  How would DTI impact the cost of MI in this scenario?

 

Again, that is a hypothetical to help me understand, it's not a situation I am in.

050719:     
021924:     


FICO 08 scores listed and are stagnated until multiple derogatory items expire over the next two years.
Message 3 of 8
CreditFun
Regular Contributor

Re: Question for lenders / brokers / experienced folks on DTI percentages

So many factors go into MI calculation.  I am isolating your variable to consider the ramfiications of a higher DTI vs a lower DTI.

 

There are a lot of MI companies.  It's like car insurance.  Some lenders have access to cheaper MI than others.

 

Best to contact a local mortgage broker for specifics.

Message 4 of 8
dragontears
Senior Contributor

Re: Question for lenders / brokers / experienced folks on DTI percentages


@BallBounces wrote:

@CreditFun wrote:

In a vaccum, all things equal, DTI's biggest impact would likely be on MI pricing.


Hmm. I had not considered this, and trying to wrap my head aroud how DTI itself would impact MI pricing.

 

So set up a hypotheticalfor me @CreditFun  :  Lets say the DTI calculation changes only because two identical people are deciding  whether to cosign or just have one person on the loan.  With two buyers, DTI is 18%.  With One it is 30%, but in both cases 20% is being put down and mid scores don't change.  How would DTI impact the cost of MI in this scenario?

 

Again, that is a hypothetical to help me understand, it's not a situation I am in.


If "they" are putting 20% down on a conventional loan the MI is the same: $0

If "they" are putting 20% down on an FHA, the MI is the same as FHA has a fix MIP 

 

Just to be clear on terminology, backend DTI is the new PITI + all current minimum depth payments 

Any backend DTI below 30% is easy, even with overlays, conventional easily goes to 42% and FHA can go above 50%.

Message 5 of 8
BallBounces
Valued Contributor

Re: Question for lenders / brokers / experienced folks on DTI percentages


@dragontears wrote:

@BallBounces wrote:

@CreditFun wrote:

In a vaccum, all things equal, DTI's biggest impact would likely be on MI pricing.


Hmm. I had not considered this, and trying to wrap my head aroud how DTI itself would impact MI pricing.

 

So set up a hypotheticalfor me @CreditFun  :  Lets say the DTI calculation changes only because two identical people are deciding  whether to cosign or just have one person on the loan.  With two buyers, DTI is 18%.  With One it is 30%, but in both cases 20% is being put down and mid scores don't change.  How would DTI impact the cost of MI in this scenario?

 

Again, that is a hypothetical to help me understand, it's not a situation I am in.


If "they" are putting 20% down on a conventional loan the MI is the same: $0

If "they" are putting 20% down on an FHA, the MI is the same as FHA has a fix MIP 

 

Just to be clear on terminology, backend DTI is the new PITI + all current minimum depth payments 

Any backend DTI below 30% is easy, even with overlays, conventional easily goes to 42% and FHA can go above 50%.


Hi  @dragontears ,  I know what backend DTI is.  In my first question, it should be clear there are several ways that back end DTI might change, principally buying a more expensive house with higher PII payment.  That's why the question surrounds back end and not front end DTI and is related to budget discussions.

 

I also was surprised/skeptical at what our friend CreditFun is implying and constructed the hypothetical to really flesh out what they meant.  Still does not make sense to me that DTI would change mortgage insurance rates for like loan types.

 

So my question for you is, again, is there any difference in those DTI figures, in the mortgage rate, UW, or appoval process.  The question is not, "will they be approved?"  That's a separate and very valid discussion Smiley Very Happy !

 

EDIT:  note also I had changed my example to "10%" down so that MI would be an actual consideration.  

050719:     
021924:     


FICO 08 scores listed and are stagnated until multiple derogatory items expire over the next two years.
Message 6 of 8
dragontears
Senior Contributor

Re: Question for lenders / brokers / experienced folks on DTI percentages


@BallBounces wrote:

@dragontears wrote:

@BallBounces wrote:

@CreditFun wrote:

In a vaccum, all things equal, DTI's biggest impact would likely be on MI pricing.


Hmm. I had not considered this, and trying to wrap my head aroud how DTI itself would impact MI pricing.

 

So set up a hypotheticalfor me @CreditFun  :  Lets say the DTI calculation changes only because two identical people are deciding  whether to cosign or just have one person on the loan.  With two buyers, DTI is 18%.  With One it is 30%, but in both cases 20% is being put down and mid scores don't change.  How would DTI impact the cost of MI in this scenario?

 

Again, that is a hypothetical to help me understand, it's not a situation I am in.


If "they" are putting 20% down on a conventional loan the MI is the same: $0

If "they" are putting 20% down on an FHA, the MI is the same as FHA has a fix MIP 

 

Just to be clear on terminology, backend DTI is the new PITI + all current minimum depth payments 

Any backend DTI below 30% is easy, even with overlays, conventional easily goes to 42% and FHA can go above 50%.


Hi  @dragontears ,  I know what backend DTI is.  In my first question, it should be clear there are several ways that back end DTI might change, principally buying a more expensive house with higher PII payment.  That's why the question surrounds back end and not front end DTI and is related to budget discussions.

 

I also was surprised/skeptical at what our friend CreditFun is implying and constructed the hypothetical to really flesh out what they meant.  Still does not make sense to me that DTI would change mortgage insurance rates for like loan types.

 

So my question for you is, again, is there any difference in those DTI figures, in the mortgage rate, UW, or appoval process.  The question is not, "will they be approved?"  That's a separate and very valid discussion Smiley Very Happy !

 

EDIT:  note also I had changed my example to "10%" down so that MI would be an actual consideration.  


@BallBounces 

I figured you knew what backend DTI was, that statement was more for the lurkers looking to learn about the mortgage process. 

 

I really can't address how DTI affects PMI as I am only aware of credit scores and LTV affecting PMI. 

Message 7 of 8
VALoanMaster
Valued Contributor

Re: Question for lenders / brokers / experienced folks on DTI percentages


@BallBounces wrote:

Any advantage (in terms of approvals, or rates, or navigating the UW process I suppose) of having a back end of ratio 18%  vs 24%  ?  If it matters, assume an unimpressive mid score of 700 ish.

 

 

(For context in the very early stages of budget setting, debt consolidation, determining DP,  etc.    )


Yes, your back end DTI can effect the PMI.

For example: 

I priced out 2 scenarios for PMI.
With a back end ratio of 50%, the PMI came back at .34 and at 30% DTI it came back at .24.

VA Mortgage Expert. Mortgage Banker lending in All 50 States.
VA, FHA, USDA. Jumbo, Conventional.
CAIVRS Expert.
Message 8 of 8
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