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Debt To Income Changes Announced Today, This Is Urgent

By
Mortgage and Lending with Be My Neighbor Mortgage 206672

Debt to income ratio maximums are being changed for FHA effective today.  All loans with Debt Ratios that exceed 50% must fund by 11/30/2009.  These loans must also be locked by November 1st.  If they do not fund, no lock extensions will be granted. 

The debt to income ratio is the percentage of the borrowers gross income that goes towards their mortgage payment and other debts.  In the past, we were able to close FHA loans with ratios at 55% and higher, rarely over 60%.

I urge you to contact your loan officer and find out what their policy is.  This is also going to cause another wave of applicants with higher ratios scrambling to close by 11/30 regardless of whether they are a first time home buyer or not.  Some banks may allow you to go a few days past the deadline, but not mine.

I also heard that Conventional debt to income ratios are going to be limited to 45% regardless of down payment in December.  Right now, with 20% down on a Conventional loans we can exceed 55% with strong credit.

I hate to be the bearer of bad news, but I rather be the first one out to notify my AR friends.

As always, please feel free to contact me with comments or questions regarding this post.

 

 

Posted by

Melissa Anderson
Texas Loan Officer

210-849-9030 cell

NMLS 206672

Amcap Mortgage

email: yourtexaslender@gmail.com

 

 

Comments (4)

Broker Nick
South Florida Real Estate & Development, Inc. - Coconut Creek, FL
Broker Nick Relocation Broker Service

Melissa - This is very important news for those who cannot show all the income and the debts are high.

 

Oct 22, 2009 10:33 AM
Ron Brown NMLS #270845
NMLS ID: 40831 - Federal Way, WA

Melissa,

Good information, but I think it is long overdue.  One of the reasons FHA has such a high default rate is because of their recent relaxed approval standards.  Hopefully, these changes will help bring some stability to the housing market.

Oct 22, 2009 11:07 AM
Broker Nick
South Florida Real Estate & Development, Inc. - Coconut Creek, FL
Broker Nick Relocation Broker Service

FHA has a high default rate, and that is different from the conventional ones?

Oct 22, 2009 12:15 PM
Melissa Anderson
Be My Neighbor Mortgage - San Antonio, TX
Your Texas Lender

FHA will always have a higher default rate because most of their loans are geared for first time home buyers with lower down payments.  FHA also had many guidelines that were much less stringent than Conventional loans.  Now they are about the same.

Also, the Community Reinvestment Act forced FHA to lend to folks with extremely limited credit.  Conventional loans were also affected, but I don't think as severe as FHA was.  FHA loans are insured by the Fed Housing Admin.  Low down payment Conventional loans are insured by mortgage insurance companies that make their own rules (used to) regardless of what the gvmt wanted.

The Conventional loan product will historically have a lower default rate because the majority of Conv. loans go to experienced home buyers.  I rarely do an FHA loan for someone selling their current home and moving to another.

I believe in the coming years you will see a much lower default rate for FHA loans because the guidelines are becoming more conservative.

FHA also monitors the default rate for each lender that originates an FHA loan.  They actually have maps to review the default rates in any given neighborhood.

These are just my opinions, I did not spend an hour researching my answer to this question, so all you mortgage folks out there, please contribute in a polite manner.

 

 

 

Oct 22, 2009 12:54 PM