We received our HUD mortgagee letter today talking about changes getting ready to hit the market. While most in our office at first panicked I assured them these were not restrictive but a benefit to borrowers. You have to truly understand what you are reading in order to have an accurate perspective of its meaning.
We are proud to be in a select group of lenders who truly offer MANUAL underwriting. What this means is when we dont agree with a computer, we can use our brains (scary huh) to actually look at and underwrite a file, to see if it still meets eligibility and risk factors for approval even though the computer system didn't issue one.
Because we underwrite in this manner, it allows some very nice perks.
Currently when we do a manual underwrite we are held to very strict guidelines, with respect to debt to income ratios, and those are 31/43.
What this means to the non industry person is the first number 31 represents what the house payment alone cannot exceed as a percentage of the borrowers gross income. The second number represents to total of both mortgage debt and all other contractual debt as a percentage of the borrowers income. For example: if income of the borrower(s) is 10,000/mo then the total PITI house payment had to be at a maximum of 3100/mo and the total debt ratio for all contractual debts at 4300/mo.
The changes happening now are that when the manual underwriter sees compensating factors those ratios can be increased. Depending on the strength of the borrower these can now be increased to 35/47 and the way I see it is that allows these borrowers to buy more home and help them qualify easier.
I like it, excuse me, LOVE IT when common sense comes into play. We are already fully underwriting all loans (except for the FHA streamline) and ensuring the borrower has the capacity to repay the loan. These loans are performing well and seeing some added benefit come to them is definitely well deserved and was along time coming. I am just glad it arrived!
If you have been denied from another lender don't let that keep you from being able to save money refinancing your home or trying to purchase one. We make many loans happen others deny and many times those are simply due to understanding lending, risk and that people are more than a credit score!
Comments(15)