High DTI - Debt to Income Ratios

When your debt payments each month are above the allowable conforming ratios, an alternative source of lending is necessary in order to get a mortgage. The conforming lenders require that your mortgage payments (PITI) are not above 28% of your gross income and your total monthly payments are not above 36% of your gross income.

Non-Conforming Lenders allow total monthly payments to be 40%, 45% and even as high as 50% of your gross income each month.

Lenders who will allow higher debt ratios often do not have two ratios a borrower must fit into, but rather only a single ratio for total debt is calculated.

Expect rates for allowing a high debt ratio at 40% or above to be a minimum of 1% higher than the best rates available.

Advantages
Allow higher debt that the confoming levels of 36%
Only one ratio is calculated
Higher credit scores will

Credit Scores and Loan to Value Determine Interest Rate
With loans of this kind, the interest rates are highly dependent on the credit scores. In fact, 10 points lower on a credit score with this type of loan can cost 1/4% to 1/2% on the interest rate and while very low credit scores are accepted at these lenders, the interst rates can become very high.

With scores above 680, you can still get a good rate. In fact,

You can get a mortgage with scores of as low as 500 and a DTI of as high as 55%.

While having a mortgage that takes 50% of your income just to pay the house payment is certainly above what you should ever pay, there are circumstances where a portion of the income is not documentable in the eyes of the lender. For instance, a spouse with bad credit scores or a boyfriend or girlfriend who puts in half the money but is not on the mortgage.

In these circumstances, a high DTI loan is the perfect answer.




Summary
Many banks and lenders specialize in only the areas of alternative lending and bad credit mortgages.

One of the main reasons I believe dealing with a broker as myself is the best way to go is in the area of the less than perfect credit mortgages. We have many lenders to choose from and rather than going to a number of banks or lenders on your own, I can give you all the choices in one place and let you know your options.


Read through this section, but if you have any other questions, please give me a call or fill out my information request form and I will be happy to give you the answers.

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