What Are FHA DTI Requirements
Update On FHA DTI Requirements:
FHA DTI Requirements are probably the most generous out of all mortgage loan programs. DTI, Debt To Income Ratios, is the sum of all of the mortgage loan borrower’s monthly payments divided by the mortgage loan borrower’s gross income. All mortgage loan programs have debt to income requirements. Conventional Loans DTI Requirements are capped at 45%. There are no front end debt to income ratio on conventional loans unlike FHA Loans. Front end debt to income ratios are the principal, interest, taxes, and insurance ( PITI ) divided by the mortgage loan borrower’s monthly gross income. FHA DTI Requirements for mortgage loan borrowers with under 620 FICO Credit Scores are capped at 43% DTI. FHA DTI Requirements for mortgage loan borrowers with credit scores of 620 FICO and higher is 56.9% back end debt to income ratios .
What Are FHA DTI Requirements On Manual Underwriting
There are cases where a FHA mortgage loan applicant cannot get an approve/eligible per automated underwriting system and will get a referred/eligible per automated underwriting system . A approve/eligible per automated underwriting system is an automated approval. A referred/eligible per automated underwriting system means that the automated underwriting system cannot render an automated approval but the file is eligible for a FHA Loan approval if it is done manual underwriting . Manual underwriting is when a mortgage loan underwriter needs to manually underwrite the mortgage loan file and carefully look at the borrower’s credit, credit history, credit scores, past collection accounts, public records, income, liabilities, and assets. The mortgage loan underwriter will look at the risk level of the file and one of the things that the underwriter will be looking for are compensating factors . Compensating factors are positive factors that strengthen the mortgage borrower such as the borrower having assets such as reserves, larger down payment, verification of rent, other income that is not used in income qualification, longevity in field, and working in fields such as the medical industry or having government jobs. FHA DTI Requirements On Manual Underwriting is at the discretion of the mortgage loan underwriter. I have gotten many FHA manual underwriting files approved and cleared to close by our mortgage loan underwriters with debt to income ratios of over 50% due to the borrower having strong compensating factors. All manual underwriting files require verification of rent , often referred to as VOR. Verification Of Rent is when a renter pays their rent payment with a check for the past 12 months and needs to provide 12 months canceled checks and/or 12 months bank statements showing the rental payments being transferred from the renters bank account to the landlord bank account. No late payments on rental payments is allowed for the past 12 months for the verification of rent to be valid.
Why Do Lenders Have Different FHA DTI Requirements
If you have high debt to income ratios and are shopping for mortgage, you may encounter that mortgage lenders have different FHA DTI Requirements. The reason being is due to mortgage lender overlays on debt to income ratios. There are two different categories of FHA DTI Requirements. There are the actual FHA minimum debt to income ratio requirements which is 56.9% DTI and there are the individual mortgage lender’s debt to income ratio requirements, which is called the mortgage lender overlay or additional requirements on top of the minimum federal debt to income ratio requirements which is the lender overlay on DTI. Most banks have FHA DTI Requirements of 45% and most mortgage lenders will cap the FHA DTI Requirements at 50%. If you have higher debt to income ratios and need to go as high as 56.9% debt to income ratio in order for you to qualify for a FHA Loan, then you need a FHA mortgage lender like myself where we have no mortgage lender overlays on FHA debt to income ratios. We do not have any overlays on debt to income ratios or any other lender overlays on FHA Loans. If you have high debt to income ratio or need a FHA Lender with no lender overlays, please contact us at Gustan Cho Associates at 262-716-8151 or email us at firstname.lastname@example.org. We are available 7 days a week, evenings, weekends, and holidays.