Posted: Fri Apr 14, 2006 3:24 pm Post subject: Can borrower get loan with higher debt to income ratio?
Can a borrower qualify for a loan with higher debt to income ratio than required? _________________ Need help choosing the right loan? Get free consultation from community lenders/consultant
douglas Guest
Posted: Fri Apr 14, 2006 3:37 pm Post subject:
Now there is a thumb rule that the ratio of your monthly payment to your income should be within 28% or the ratio of your monthly income to your monthly non-housing debt plus your monthly payment should be within 36%.
But lenders are not too rigid on it and it is sometimes found that in spite of satisfying these ratios you may not be able to qualify for a loan. On the other hand you may be able qualify even after you failed to meet this ratio.
See, normally lenders do try hard within the maximum possible limit of their own to meet your requirement even if you fail to meet the required ratio.
If the lender finds some other factor in you favorable to your request, then that might help. For example there is a negligible addition in the new payment with the one that you were paying with the old debts or bills. In that case they may allow you for the loan.
Sometimes they try to find out an alternative loan product to suit your needs. So, even if the ratio becomes higher there is a possibility. A good lender/broker will always try to help you in this matter.
The lenders also consider some other compensating factors like if there is a larger amount paid as down payment or if you have a good amount of cash reserves.
I have seen conforming loan approvals with debt ratios as high as 65% through DU. There is really a general rule of thumb and there are a lot of "no ratio types" of loan programs available. Really you probably need to speak with a qualified morgtgage professional and review your option. Without credit scores income or asset information nobody can really tell you what your back-end ratio needs to be. _________________ Cedric Kalvesmaki
***Professional Disclaimer***
While I am a Mortgage Professional, this advice is generic in nature only.
A Debt-to-Income Ratio (DTI) is a calculated income vs. expense percentage that is used to assist lenders in determining if a borrower can reasonably be expected to make on-time payments for a mortgage loan they have applied for.
In the past, the maximum allowable DTI for a mortgage loan applicant was set as a strict underwriting requirement ... usually capped at 42% based on the fact that most borrowers at this level did not default on their mortgage loans. The problem with this method was that many borrowers had proven the ability to make on-time payments at higher DTI's.
In an effort to improve risk based lending; Fannie Mae, Freddie Mac and HUD/FHA all developed Automated Underwriting Systems (AUS) that would allow for flexible DTI's based on the overall strength of the entire application. For example, a borrower putting 50% down on a home purchase does not create much lending risk ... so the loan approval may not require any proof of income from the borrower. If the borrower did need to show proof of income, the AUS may allow a debt-to-income in excess of 65% as mentioned by Cedric.
As stated by Samantha, a reputable mortgage broker with a complete understanding of your specific borrowing situation will arrange mortgage financing with a mortgage program that allows for the risk you present as a borrower.
Best of Luck! _________________ Bill Clanton is a Mortgage Specialist and Manager of State Street Mortgage of Illinois. StateStreetMortgage.Net
Compensating factors are important. And say you really do make the money you just can't prove it and you have said money in the bank or investments you could show that you really do make the money you say. And even though you don't DTI you may show you can qualify through other methods like using bank statements or doing a stated income or even a no document loan. _________________ Eric Matthews
Samantha
