Miami Home Loan Discusses FHA DTI Revisions

FHA Debt-To-Income (DTI) requirements have changed, and Miami Home Loan staff outlined these changes for you in this note.  Please call me, James Carter with any questions at Element Funding, at 305-525-6742.  We will get you or your buyer qualified, or, tell you what is needed to be qualified.

AUS approved FHA loans, scores >= 660 and < 680:

Loan files with scores greater than or equal to 660 and less than 680 permits a maximum DTI of 55%.  The DTI greater than 55% may be permitted with at least one compensating factor as defined by PRMI and a written summary from the DE underwriter explaining their rational for credit approval and borrower’s ability to repay at the higher DTI.

AUS Approved FHA Loans, scores >= 640 and < 660:

Loan files with scores greater than or equal to 640 and less than 660 permit a maximum DTI of 50%.  DTI greater than 50% may be permitted with at least one compensating factor as defined by PRMI and a written summary from the DE underwriter explaining their rational for credit approval and borrower’s ability to repay at the higher DTI.

AUS Approved FHA Loans, scores <640

Loan files with scores less than 604 such as State Housing Agency Loans permit maximum debt to income ratio of 43%.  DTI up to 45% may be permitted with at least one compensating factor and a written summary from the DE underwriter explaining their rational for credit approval and borrower’s ability to repay at the higher DTI.  If the DTI exceeds 45% the loan file may be submitted to the PRMI Credit Committee for an exception review.

Please note: the PRMI Choice loans will continue to follow the existing process as outlined in the Choice Guidelines.  The Choice loan product is designed for loans when the buyers have less than a 640 credit score.

AUS Refer/Manually Underwritten Loans:

All FHA AUS refer or manually downgraded loans, regardless of the score are restricted to a maximum debt to income ratio of 43%, per FHA guidelines. DTI up to 45% may be permitted with at least one compensating factor and a written summary from the DE underwriter explaining their rational for credit approval and borrower’s ability to repay at the higher DTI. If the DTI exceeds 45% the loan file may be submitted to the PRMI Credit Committee for an exception review.

Acceptable Compensating Factors for High DTI’s:

  •  Decrease to Housing Expense Payments

The borrower has successfully demonstrated the ability to pay housing expenses greater than or equal to the proposed monthly housing expenses for the new mortgage over the past 12-24 months.  Verification of rent can be obtained from the credit agency or with cancelled checks if a provate party or relative is the landlord.

  •  Down Payment

The borrower makes a large down payment of 10% or higher toward the purchase of the property.  Gift funds are an acceptable souce.

  •  Compensation or other income not used for qualifying

The borrower receives documented compensation or income that is not reflected in effective income, but directly affects his/her ability to pay the mortgage.  Such as food stamps or similar public benefits.  Income used must come from a borrower who is obligated on the note.

  •  Substantial Cash Reserves

The borrower has substantial documented cash reserves (at least three months PITI) after closing.  The lender must document the substantial cash reserve liquid or readily convertible to cash and documentation verifying the funds may be withdrawn or accessed prior to retirement or job termination to be used for cash reserves or cash to close.

  •  Primary Wage-Earner Relocation

The subject home is being purchased because the primary wage-earner is relocating, and the secondary wage-earner demonstrates all the following:

  • Established employment history AND
  • Expected to return to work AND
  • Reasonable prospects for securing employment in a similar occupation in the new area

NOTE: The underwriter must document the availability of the potential employment (help wanted ads in local paper or internet search)

Loan files requiring Credit Committee approval are to be submitted to the Credit Committee by the underwriter once all conditions have been met with the DTI Credit Approval Summary completed.

These changes are the major FHA DTI revisions.  So, if you have questions for yourself or a buyer about their ability to qualify, please call me, James Carter at Element Funding, at 305.525-6742.  We will get your Miami Home Loan on track and let you know what is needed to qualify!

 

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