Conventional Loan Debt To Income Ratio Limit
Home Loans And Debt To Income Ratio Limit:
Most conventional loans have debt to income ratio limit of 45%. What this means is that your total monthly payments divided by your total monthly gross income cannot exceed 45%. If your gross monthly income is $10,000, your total monthly payments cannot exceed $4,500 which includes your housing expenses ( principal, interest, taxes, insurance, homeowners association). However, there are mortgage lenders that will extend the 45% debt to income ratio up to 49.9% with Freddie Mac. For those with high debt to income ratio who exceed conventional loan debt to income ratio limits, FHA loans might be an option. FHA loans have more lenient debt to income ratio requirements tha any other mortgage loan program. FHA allows back end debt to income ratio limit to be capped at 56.9%..
FHA Loan Debt To Income Ratio Limit
Depending on your credit scores, FHA’s maximum debt to income ratio is as high as 56.9%. However, if your credit scores are lower than 620 FICO, FHA loan debt to income ratio limits debt to income ratio to 45%. There are many FHA mortgage lenders who will approve FHA mortgage loans up to a 56.9% debt to income ratio as long as you have credit scores over 620 FICO. For those whose debt to income ratio is higher than 56.9%, FHA allows non-occupied co-borrowers to act as cosigners. Cosigners are a great tool for FHA loan borrowers who exceed the 56.9% debt to income ratio.
Jumbo Loans Debt To Income Ratio Limit
With jumbo loans, which are mortgage loans that exceed $417,000, the maximum debt to income ratio is normally set at 40%. Most jumbo loan lenders are pretty set on their 40% debt to income ratio requirements and exceptions are normally not made in most circumstances.
Conventional Loan To FHA Loan
In some cases, conventional loan borrowers convert to FHA mortgage loan programs because they have high debt to income ratios. One major disadvantage with FHA loans compared to conventional loans is that mortgage insurance premium is mandatory for the life of the loan. Due to new FHA regulations effective June 3, 2013, FHA mortgage insurance is mandatory no matter what the loan to value is on the subject property. Before the new FHA rule came into effect, FHA mortgage insurance premium was only required for a minimum for 5 years and was automatically cancelled once the loan to value of the home reached 78%. Now, FHA mortgage insurance premium is required as long as you have the FHA loan. The only way out is either to pay off the loan or refinance it to a 80% loan to value conventional mortgage loan.