Mortgage DTI Overlays
Lender DTI Overlays
Many banks and mortgage companies have DTI Overlays. Debt To Income Ratio , referred to as DTI, is one of the most important factors in qualifying for a home mortgage. Debt To Income Ratio is calculated by adding the sums of all minimum monthly debt payments a mortgage borrower has and by taking that sum and dividing it by the mortgage borrower’s monthly gross income. With mortgage lenders, the proposed P.I.T.I. ( principal, interest, taxes, and insurance ), is included as a monthly debt payment in calculating debt to income ratios for a home loan qualification. There are two types of debt to income ratio requirements. You have the federal minimum mortgage lending guidelines on debt to income ratios and then you have each individual mortgage lender overlays with DTI. Each individual mortgage loan program has their own DTI Overlays Requirements. FHA DTI Requirements allow up to a 56.9% DTI for FHA mortgage borrowers with credit scores of 620 FICO or higher and the front end debt to income ratio requirements are capped at 46.9% DTI on borrowers with credit scores of 620 FICO or higher. Borrowers with under 620 Credit Scores requires a debt to income ratio of no greater than 43% DTI under 2016 FHA Guidelines . Debt To Income Ratio Requirements On Conventional Loans are capped at 45% DTI. USDA Loans have debt to income ratio caps at 41% DTI. VA Loans debt to income ratios depends on the finding of the Automated Underwriting System but most VA mortgage lenders will require 43% debt to income ratio limits. Jumbo Mortgage Lenders normally have debt to income ratio cap limits at 40% DTI. Just because you meet debt to income ratio requirements does not mean that you qualify with all mortgage lenders. Many mortgage lenders can impose their own overlays with DTI. Overlays are individual mortgage lenders requirements that surpass the minimum mortgage lending guidelines that is set by FHA, Fannie Mae, Freddie Mac, USDA, and VA.
Examples Of DTI Overlays
FHA mortgage lending guidelines on debt to income ratios depends on the borrower’s credit scores. If your credit scores are at least 620 FICO or higher, the maximum debt to income ratio requirement on FHA Loans is 56.9% DTI. If your credit scores are under 620 FICO, then the debt to income ratio requirements will drop to 43% DTI.
Many mortgage lenders will have overlays with DTI depending on the borrowers credit scores. For example, some FHA mortgage lenders will not accept debt to income ratios of higher than 45% DTI if the borrowers credit scores are under 680 FICO credit scores. Other FHA mortgage lenders will limit the debt to income ratios to 43% DTI for FHA mortgage loan borrowers who have credit scores of 640 FICO and under. Some FHA mortgage lenders will limit the maximum debt to income ratio cap to 50% DTI even though the borrower has over 700 FICO credit scores even though FHA DTI limits are capped at 56.9% DTI.
If you have higher debt to income ratios, you need to consult with a mortgage lender who have no DTI Overlays like myself. Contact me at 262-716-8151 if you are looking for a home loan with no overlays with DTI. We are available 7 days a week, evenings, weekends, and holidays.