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Guest

My debt to income ratio is high because I own a coop and I want to buy a house and then sell the coop.

So right now two mortgages would make my debt to income ratio 36% if you dont count taxes and PMI/HMI. 53% if you count taxes and maintenance. And 55.5% if you add PMI/HMI.

I am nto sure if I am using the right terminology so lets make up some numbers. Let's say my gross monthly income is $10,000.
Old mortgage + new morgage = $3600
old mortgage + maintenace + new mortgage + monthly taxes = $5300
old mortgage + maintenace + new mortgage + monthly taxes + PMI +HMI = about $5550

So how do the percentages look for an FHA loan? Is mortgage agent going to freak out?

My solution to this problem is to take into account that my girlfriend pays me rent. Which is true, we share expenses. She is not on the old title and I can't put her on the new mortgage because she was recently unemployed. But she still has enough savings to pay me rent for years to come. So WILL the mortgage company allow that to be added to my income and how much should I claim to get to the maximum debt to income ratio allowed?

Any help is truly appreciated!

smithsussane · Posted: Mon Sep 28, 2009 8:15 pm Post subject:

Hi SD!

Welcome to forums!

It is true that you won't be able to add your girlfriend to the mortgage docs as she is unemployed right now. Though she has her savings, it won't be counted as your income when you are applying for a mortgage.

FHA has come up with guidelines in order to prevent homebuyers from getting into a home they cannot afford. The debt to income ratios are used to calculate whether or not the borrower is in a sound financial position which would allow him to meet the demands that are often included in owning a home. The maximum ratio to qualify is 29% in reference to mortgage payment expense to effective income (i.e. divide total house payment by gross monthly income). In reference to total fixed payment to effective income (i.e. divide total monthly debt by gross monthly income), the debt to income ratio should be 41%.

Feel free to ask if you've further queries.

Sussane

Guest

that 41% sounds very low, I believe my broker said 50%. Is it because I have high credit score and a lot of disposable income?

I've read articles that back up the 50% number. Is that only for conventional mortgage or something?

gmakerley · Posted: Tue Sep 29, 2009 8:10 am Post subject:

with automated underwriting, your debt ratio can probably be above the 50% threshhold and still get approved - depending on your other loan characteristics. this applies to both fha and conventional lending.

at 55% i think you're way too high, and at 53% i think you'll be on the cusp at best. if your credit score is above 700, you'll have a far better chance to be approved with a high ratio, and if you have reserves, etc.

your girlfriend's "rent" payments don't exist in the mortgage industry. do you claim that money as income on your federal tax return? if so, then you've got a chance to use it. if not...oh well...

jveenstra · Posted: Tue Sep 29, 2009 9:54 am Post subject: Debt Ratios

If your debt ratios are in the 50%+, checkout what you want to do quickly.

After Decmber 12, 2009, the automated approvals will alow for a maximum of 45% debt ratio. You can still get automated approvals higher than that now, but, do it fast.

gmakerley · Posted: Tue Sep 29, 2009 9:57 am Post subject:

ahhh...and i remember those days when we had discretion to stretch ratios...not so any longer. 64.99 was the best we could get du or lp to stretch to...back when expanded approval loans were available, you could still get an ea-iii with that ugly a ratio.

Guest

thanks for the info! I think I am starting to understand, this stuff isn't as hard as I thought. MY broker has suggested a 80 10 10 conventional mortgage which will put me at 49% ratio. Whereas the FHA was at 55%. MY credit score is around 795-800.

gmakerley · Posted: Tue Sep 29, 2009 10:21 am Post subject:

that's scary. most loan officers don't get it (from my experience), though they are getting better at it. some underwriters struggle with it too.

maybe you need to switch industries, sd.

Guest

This maybe a little premature, but the whole reason I am doing all this is so I can buy a new place without selling my old one. Once I close on the new place I plan on selling my old place and then my ratio will drop to 34%.

At that point will I be able to take out an equity loan to pay off the piggyback mortgage and get cash to make some repairs?

gmakerley · Posted: Tue Sep 29, 2009 10:46 am Post subject:

the true answer today is "maybe." i'll amend that by saying that if the equity in your new purchase warrants it, and your ratios won't be excessive with the new borrowing that eliminates that second mortgage, then you'll likely find someone to do that loan.

jveenstra · Posted: Tue Sep 29, 2009 12:31 pm Post subject: High DTI

If you can get the 80-10-10 for the purchase, that is great. Second mortgages with a 49% debt ratio at 90% of the value are not easy to come by. Hopefully, it is available for you.

However, getting a second mortgage/ home equity over 90% of value for the repairs on the new home appears to really be a stretch these days. You would need a home equity over 90% of the value, and, while I'll never say never, that probably does not exist. If you clear cash for the sale, that's good for the repairs. I'm inclined to think that is all you will have available.

Guest

All of a sudden my lender changed his tune. 80/10/10 is not possible, only 80/15/5 which I cant do because I don't have the money. He also suggest 90/10 and that didn't work. And then we wet back to FHA but now there is a new stipulation. He wants me to have 30% equity in the coop I own. This requires me to put in a lot of cash into the principle of my current mortgage.

I'm really confused now, should I get a second opinion?

sunnyca2009 · Joined: 04 Aug 2009 Posts: 1731 35.55 Dollars($)

I think you shoudl get a secodn opinion

If your lender keeps changing the terms and requirments

Guest

I read that you need 25% equity in your first property to use it as a rental property if you are applying for an FHA loan. It is 30% for a conventional home. It would take a lot of money to get my equity to 25%, but it might be possible. But if I pay a lot of cash to do this and then the mortgage doesn't go through then I would have essentially lost a lot of cash for no good reason.
I believe the 25% equity rule is only for rental properties. What if I say it's just a vacation property. Will they still require that rule? If they don't then, I'll just need to find a bank that can handle a 50% debt to income ratio.

sunnyca2009 · Joined: 04 Aug 2009 Posts: 1731 35.55 Dollars($)

They want to make sure that after you buy this secodn home you are able to make payemnts on both the mortgages

They just want to prevent any mroe foreclsosures

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