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High debt to income ratio mortgage loans

Many people have high debt to income ratios and can still qualify for a mortgage loan. There are many options available out there for people who have a high debt to income ratio, also referred to as DTI. One solution to a high debt to income ratio is to work with a lender that allows for a high debt to income ratio. Typical good credit lenders allow for debt ratios around 40%, although many times an automated underwriting system may qualify borrowers with a much higher DTI too. FHA lenders will allow a maximum debt to income ratio of 50% and a few will go as high as 55% with compensating factors (higher FICO scores, liquid assets, etc.).

On higher debt-to-income ratio borrowers, a lender will sometimes require a certain amount of disposable income before approving this high debt ratio loan. Disposable income is calculated by taking the gross monthly income minus the monthly liabilities. If the borrower has a large amount of disposable income, say $3000 a month, then the lender is more likely to approve the loan.

Paying off high payment credit card and car loan accounts as part of a debt consolidation or cash out refinance is a great way to qualify for a lower rate mortgage.

If you are doing a mortgage refinance it may be possible to consolidate some of your other debts, such as credit cards, car loans, etc. into your new mortgage. By eliminating your other monthly debt payments, leaving you with just your new mortgage payment, you might find that this significantly lowers your debt to income ratio.

If you are looking at an FHA mortgage you can use a non occupying co-borrower and include their income to qualify to lower the overall debt ratio.  FHA is the only type of loan that allows a non occupying co-borrower.

Even if you make more than enough money to comfortably pay for the mortgage you may find that you have to look at some of these other types of loans because the lender will not accept all of your income. Some examples would be a 2nd job, commission income, or bonuses that you have been receiving less than 2 years. Lenders may also not include rental income you receive if you rent out rooms in your home and do not have a signed lease, or proof of 12 months payments received.

If you have questions about your debt ratio feel free to contact us today.

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