Posted on: 02nd Dec, 2009 01:08 pm
Is there a hard limit on the front end ratios for FHA loans. Property taxes are nuts where I live and a ratio of 28% is making it difficult to find a house we want to buy. The difference between 28% and 32% is huge. 28% is the number I've seen float around quite a bit.
With 5% down and 700+ credit, are there good alternatives to FHA without incredible interest rates that would get us a higher ratio?
thanks
With 5% down and 700+ credit, are there good alternatives to FHA without incredible interest rates that would get us a higher ratio?
thanks
most lenders are more concerned with the back ratio, which needs to be 43% or less. with your credit, as a compensating factor (if needed), i'd think you could take your ratio up to 32% and greater.
taxes are nuts in general anyway.
there aren't many alternatives. conventional loans aren't even a good deal with 5% down, because the mi companies won't insure you with a 700 score - they all want 720 (last i knew) and perhaps more.
taxes are nuts in general anyway.
there aren't many alternatives. conventional loans aren't even a good deal with 5% down, because the mi companies won't insure you with a 700 score - they all want 720 (last i knew) and perhaps more.
would I need mi with an FHA loan then? thanks george.
fha loans have mortgage insurance premiums in every case, yes. there's an upfront premium of 1.75% of the loan amount, and this is usually built into your loan (you borrow it), and there's a monthly premium calculated at .55% of the loan amount.
Right now we can get automated underwriting approval for FHA mortgages up to a 46.99% house debt ratio and a 54.99% total debt ratio. Not to be confusing, this is through the Fannie Mae DU automated underwriting engine.
Over the weekend of December 12, this engine is being modified to a maximum debt ratio of 45%. We are not sure how that will affect FHA mortgages---they may be "stuck" at a maximum of 45% debt ratio also.
It is safe to say at this time that you would probably be ok to a 45% total debt ratio. Over that, we have to wait until December 14 and see what affect the changes had for FHA mortgages.
While it is possible to get these higher debt ratios, it is not guaranteed for everyone. The "computer" decides who is eligible for what based on the total picture--credit score, down payment, reserves, length of employment, etc
Over the weekend of December 12, this engine is being modified to a maximum debt ratio of 45%. We are not sure how that will affect FHA mortgages---they may be "stuck" at a maximum of 45% debt ratio also.
It is safe to say at this time that you would probably be ok to a 45% total debt ratio. Over that, we have to wait until December 14 and see what affect the changes had for FHA mortgages.
While it is possible to get these higher debt ratios, it is not guaranteed for everyone. The "computer" decides who is eligible for what based on the total picture--credit score, down payment, reserves, length of employment, etc
and just to add on to what john just mentioned, having a 45% back ratio isn't necessarily going to guarantee an approval - despite what automated underwriting may provide. it is entirely possible that other factors may result in a decline, as we have all seen far too often in these times.
from what you've described, morabito, it would seem you're in good shape, though you didn't note how much other indebtedness you have. but with a front ratio in the low 30's or better, you've got a favorable beginning.
from what you've described, morabito, it would seem you're in good shape, though you didn't note how much other indebtedness you have. but with a front ratio in the low 30's or better, you've got a favorable beginning.
any lender need less 43%?
please restate your question and elaborate
My back end ratio is great. We only have a small student loan payment. A loan amount over what we need puts us at 35% on the back end. (we worked very hard to clean this up over the last couple years)
Does a low back end provide more flexibility on the front end approval or are they really separate beasts altogether. thanks!
Does a low back end provide more flexibility on the front end approval or are they really separate beasts altogether. thanks!
OOps, sorry I was the original poster, not guest.
My back end ratio is great. We only have a small student loan payment. A loan amount over what we need puts us at 35% on the back end. (we worked very hard to clean this up over the last couple years)
Does a low back end provide more flexibility on the front end approval or are they really separate beasts altogether. thanks!
My back end ratio is great. We only have a small student loan payment. A loan amount over what we need puts us at 35% on the back end. (we worked very hard to clean this up over the last couple years)
Does a low back end provide more flexibility on the front end approval or are they really separate beasts altogether. thanks!
yes it does, to a degree, but in this case, i believe you have no worries about that. with a 35% back ratio, how bad can your front ratio be? as you'll noted, john mentioned a 46% front ratio as getting approval on the automated underwriting system, so you truly ought to be home free.
We're really just looking to go with a 32 or 33% front end. Its very confusing to get a reply from John saying 46% would work when some of the BASIC mortgagefit.com pages say its 28 or 29%:
http://www.mortgagefit.com/front-end.html
http://www.mortgagefit.com/calculators/diratio.html
http://www.mortgagefit.com/back-end.html
If we go "outside the norm" what are the consequences? Are there high interest rate penalties for going higher than the 28/29?
many thanks!
http://www.mortgagefit.com/front-end.html
http://www.mortgagefit.com/calculators/diratio.html
http://www.mortgagefit.com/back-end.html
If we go "outside the norm" what are the consequences? Are there high interest rate penalties for going higher than the 28/29?
many thanks!
no penalties at all. with automated underwriting, all the relevant risk factors on a loan are analyzed at the same time based on probability (i suppose), and later reviewed by an underwriter. over time, these risk factors are tweaked, of course, and what we are now seeing is that elevated ratios are not held against most people whose credit, job stability, assets, etc. are favorable.
there are no lenders who would penalize a borrower for exceeding the ratios that are "published" but acceptable by automated underwriting standards. that would be pure folly, in any event.
i don't know what "norm" is anymore, anyway; nor do most of us still scratching our heads every time a new change comes through.
there are no lenders who would penalize a borrower for exceeding the ratios that are "published" but acceptable by automated underwriting standards. that would be pure folly, in any event.
i don't know what "norm" is anymore, anyway; nor do most of us still scratching our heads every time a new change comes through.
I think you're going to be fine...do you have something against FHA? Your MI will probably be less...is USDA an option where you live (100%, no MI)
i think nobody ought to have anything against fha, given their pre-eminence in lending in the last few years. usda sounds like a great program - not very rural here, so we wouldn't get much call for it.
my lender keeps telling me that i do not qualify under the fha hamp program because of the front end ratio not being enough. what is considered enough and how do i know that it is or is not. must be some kind of secret calculation or something. can you shed some light on this topic?