High Debt To Income Ratio Mortgage Loans And Solutions


High Debt To Income Ratio Mortgage Loans

This BLOG On High Debt To Income Ratio Mortgage Loans Was UPDATED On June 27, 2017

Many mortgage loan borrowers think they will not qualify for a mortgage loan because they have high debt to income ratio.  Many mortgage lenders have overlays on high debt to income ratio mortgage loans. The best loan program for high debt to income ratio mortgage loans is FHA Loans.

  • They are correct in a sense that the majority of mortgage lenders like to see the mortgage loan borrower debt to income ratio no more than 43%. 
  • The requirement of 43% debt to income ratio is a lender overlay by the individual lender and is not HUD Guidelines .
  • FHA Guidelines On Debt To Income Ratios allows up to 46.9% front end DTI and 56.9% back end DTI for borrowers with 620 credit scores or higher.
  • The Gustan Cho Team specializes in originating and funding FHA Loans with no lender overlays.

Lenders Specializing In High Debt To Income Ratio Mortgage Loans

If you have high debt to income ratio, I suggest that you consult a mortgage broker who specializes in high debt to income ratio mortgage loans.

  • Not all lenders have the same DTI Requirements.
  • Every mortgage lender has different lender overlays on debt to income ratio as well as credit scores overlays. 
  • Just because one mortgage lender has a maximum debt to income ratio requirement of 43%, doesn’t mean that all mortgage lenders do. 
  • As mentioned earlier FHA Guidelines on debt to income ratio  is 56.9% back end and 46.9% front end on FHA Loans.

Conventional DTI Requirements

Conventional loans have tougher debt to income ratio mortgage lending guidelines.

  • Fannie Mae caps DTI to 45% to get an approve/eligible per Automated Underwriting System automated approval.
  • Freddie Mac caps Debt To Income Ratio to 50% for an AUS automated approval.
  • Minimum credit scores on Conventional Loans is 620 FICO.

Solutions To High Debt To Income Ratio Mortgage Loans

  • Other ways of solving a high debt to income ratio problem is paying off existing debt and creditors. 
  • Paying off  open credit card balances to eliminate the monthly payments would be a great start. 
  • Most times a car payment can be $300 dollars or more per month. 
  • Paying off car loan can give a lot of buying power.
  • Trading in existing high payment car payment to a lower car payment can help.

Non-Occupant Co-Corrowers

  • Mortgage borrowers with high debt to income ratio trying to qualify for FHA Loans are allowed to have non-occupant co-borrowers added on the loan.
  • The Federal Housing Administration allows multiple non owner occupied co-borrowers.
  • Freddie Mac allows non-occupant co-borrowers.

Other Income

  • Mortgage lenders have income requirements.
  • Overtime income , part time income, bonus income can be used as additional income.
  • Overtime income, part time income, commission income, and bonuses can be used as other income only if borrower has two year history of earning such income
  • If it is close to 2 years, a letter will be required by the company human resources department stating that borrower will be guaranteed so many hours for the next six to twelve months can be used. 
  • Rental income can be used if declared it on income tax returns. 
  • Depreciation can be added back on as income if stated on income tax returns.

Mortgage borrowers who have higher debt to income ratio and looking for a lender with no lender overlays can call us at 1-800-900-8569 or email us at gcho@gustancho.com.

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