Wednesday, October 28th, 2009

i recently applied for FHA loan Now I have a question about income to debt ratio for that loan?

debt ratio
jicarlo h asked:


Here is my info if anyone can help. I make 2988.80 gross a month not including overtime. which i make about 60 hours a month in that. I have a 400/month car note which ends in may08 i pay 600/mon child support and that is about it except i do pay 375/mon rent and about 40/mon insurance. I was told my income to debt ratio was 47 percent when it needs to be 43 percent. the underwriter told me this today because she thinks that they are looking hard at that. Is this to high to get the house i want which cost 124500 and we are put 3% down on it. Is there any mortage brokers out there who could tell me what is going on right now because right now this seems to be the only thing standing in the way of the house i want.

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4 Responses to “i recently applied for FHA loan Now I have a question about income to debt ratio for that loan?”

Etta P Says:
October 29th, 2009 at 12:04 am

Your underwriter is correct. Actually the FHA guideline for debt to income is 41%, with compensating factors then 43% is acceptable. with the rising foreclosure ratios in today’s market, underwriters are being pressed to make prudent decisions. Too much house can be a killer. Think about that, almost 50% of your income, before taxes, will go for bills and this does not include gas, utilities, food, repairs, or other such expenses. This haft hazard lending practice has been part of the downfall we in underwriting have seen and have to answer for, if a FHA loan defaults. It’s not just the sub prime that has been a contributing factor to the current housing mess. Have you ask your underwriter if they Community 100?
I put a website below that may give you more information. I also put the website for FHA as a further source of information.
Hope they help!

CreditAlignment.com Says:
October 31st, 2009 at 2:10 am

there many programs that can benefit you with FHA being one of the best. Not all lenders do it over 41% ..but there are some that do up to 50% DTI.

there needs to be other compensating factors to help you out.

Overtime needs to have been received for the LAST 2YRS. it is then AVERAGED from the 2yrs. Installments with 10less payments are excluded from the FHA scorecard

Digger Says:
November 3rd, 2009 at 9:14 am

Well that sound about right. With just the information you gave, here’s what I calculate.

If they said your DR was 47%, then the PITI is $804.
$2,988 X 47% = $1,404
$1,404 – $600 = $804
The car payment isn’t included in debt ratios because it is an installment payment with less than 12 months remaining.

However, if you’ve been working 60 hours of overtime cosistently for the last 12 months and you can prove it with W-2s and pay stubs, then they can include OT in your gross monthly income.

The DR is too high only if they are doing a manual underwrite or the DU/LP findings say so. Ask your loan officer which one it is. Sometimes the AU findings will be Approve/Eligible with a higher DR if there are other compensating factors like credit, assets, etc.

I suggest you talk to at least one other HUD-approved FHA lender.

Good luck!

oompa Says:
November 6th, 2009 at 8:19 pm

Debt to income ratios are almost the most important thing about qualifying for a loan. In general, FHA is far stricter on DTI than other loan products. The hard guideline is a total debt ratio ratio under 41. The formula to determine your debt ratio is as follows: [your child support obligation + your PITI (mortgage payment, taxes and insurance) + any minimum credit card payments] divided by your gross monthly income.

I am a mortgage broker, and contrary to the above, FHA is becoming more lenient (that i can see.) I am funding a FHA loan tomorrow that had a total 52% debt ratio. This was achieved through the use of an Automated Underwriting System (AUS). Your lender may know this as DO, DU or LP; it is essentially a industry standard computer program which makes a determination; approve or deny. They are in most cases far more likely to approve than an actual underwriter.

What it sounds like is that they are seeking an exception to normal underwriting standards, but it’s difficult to tell. A final decision should be issued in 48-72 hours from your last contact with them. They will review your file in the greater perspective.

Do not fear, if they cannot approve you, seek first the help of the seller. Your agent should negotiate that you were denied due to too large of payments and they need to either A. reduce the price of the home slightly, or B. Pay a point to discount your interest rate, thus lowering your monthly payments.

Alternatively, you could put slightly more money down, or pay an additional .5 to 1 points to discount the rate yourself. If it was me, I’d make the seller cough it up(buyer’s market). But this is all moot-be patient for the decision to come. it will either be good news or news on what to do, you are very close to the limit.

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