This BLOG On Debt To Income Ratios On Conventional Loans Versus Other Loans Was UPDATED And PUBLISHED On November 3rd, 2019
Debt to income ratios is what determines whether or not you qualify for a mortgage loan.
- Debt to income ratios is the sum of all of the monthly minimum payments, including proposed principal, interest, taxes, and insurance ( PITI ) divided by monthly gross income
- Debt to income ratios requirements are different for the various mortgage loan programs
- FHA has a debt to income ratio caps at 56.9%
- USDA loan programs have a debt to income ratio caps at 41%
- VA loans do not have a debt to income ratios caps
- VA Loans debt to income ratio is determined by Automated Underwriting System Findings
- Jumbo mortgages have a debt to income ratio caps depending on the particular lender
- Portfolio lenders often have a debt to income ratio caps are determined by the individual lender
- Debt To Income Ratios On Conventional Loans is capped at 50% to get an approve/eligible per AUS FINDINGS
In this article, we will cover and discuss the debt to income ratio guidelines on conventional loans.
What Are Conventional Loans
Conventional loans are loans that meet Fannie Mae and/or Freddie Mac lending guidelines and are different than FHA loans. FHA, VA, USDA Loans are guaranteed by the government. Conventional Loans are not guaranteed by the government.
- Conventional loans have different mortgage lending guidelines
- Different credit score minimum requirements
- Debt To Income Ratios On Conventional Loans requirements is lower than FHA loans
- The two most popular loan programs are FHA loans and Conventional loans
- We will compare these two loan programs on this blog
Requirements On Conventional Loans
Conventional minimum credit score requirement is 620 whereas minimum credit score requirements for FHA loans is 580:
- Conventional loans have different waiting period requirements after a bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale than FHA loans
- There is a 7 year waiting period after foreclosure to qualify for a conventional loan after the recorded date of a foreclosure
- There is a three year waiting period after foreclosure to qualify for an FHA loan
- There is a four year waiting period after a deed in lieu of foreclosure or short sale to qualify for a conventional loan
- There is a three year waiting period after a deed in lieu of foreclosure or short sale to qualify for an FHA loan
- There is a four-year mandatory waiting period to qualify for a conventional loan after a discharge date of a bankruptcy
- There is a two year mandatory period after a bankruptcy discharge date to qualify for an FHA loan
- Minimum down payment for a conventional loan is 3% down payment for a first time home buyer
- First Time Home Buyers are defined as someone who has not owned a home in the past three years
- 5% down payment for seasoned home buyers
- FHA requires a minimum 3.5% down payment on a home purchase
Debt To Income Ratios For Conventional Loans
Debt to income ratios for conventional loans is capped at 50%.
- There is no front end debt to income ratios for conventional loans
- FHA loans, the maximum front end debt to income ratios are capped at 46.9% and the back end is capped at 56.9%
- The front end debt to income ratios are often referred to as housing ratios:
- Proposed principal, interest, taxes, and insurance divided by the borrower’s monthly income
- The back end DTI is the sum of the PITI plus all monthly minimum payments divided by the borrower’s gross monthly income
FHA Loans Versus Conventional Loans
FHA loans have much lenient mortgage lending guidelines than conventional loans.
- Debt to income ratios FHA guidelines are much more generous than conventional loans
- FHA loans have much more lenient lending guidelines
- Waiting periods after bankruptcy, foreclosure, deed in lieu of foreclosure, a short sale is much shorter for FHA loans than Conventional Loans
- FHA loans also ignore unpaid collection accounts
- Especially medical collection accounts where borrowers with unpaid collection accounts can qualify for a mortgage
- FHA allows non-occupant co-borrowers to be added on the mortgage for those who cannot get income documentation and/or have no income
Other Loan Programs
Every loan program has different debt to income ratio requirements.
- FHA is far the most generous when it comes to maximum debt to income ratios at 56.9%
- USDA loans are capped with 41% DTI
- VA Loans does not have a maximum debt to income ratio cap
Home Buyers or Homeowners who need to qualify for mortgage loan with a national direct lender with no mortgage lender overlays can contact us at 262-716-8151 or text us for faster response. Or email us at firstname.lastname@example.org. We do not have any overlays Debt To Income Ratios On Conventional Loans. We are available 7 days a week, evenings, weekends, and holidays.