Hickory Area Happenings!

Lenders use debt-to-income ratios to assess a borrower's ability to manage monthly payments and repay debt.  It's a key factor in mortgage approval and determines the maximum loan amount a borrower may qualify for.  Each loan program has different flexibility levels based on risk tolerance - or the specific borrowers ability to repay.

Typical debt-to-income requirements by loan type:

Conventional           Up to 45% (sometimes 50% with strong credit or reserves)

FHA             Up to 43% - 50% possible with compensating factors

VA              The guideline is 41% but can easily go much higher (into the 50s) with residual income analysis

USDA           29% front end (mortgage and escrows only) and 41% back end (all debt plus mortgage and escrows)

Jumbo Loans      Typically 40-45%

Down Payment Assistance:

1.  Maximum 45% back in to the loan amount

2.  Some programs consider front end and must have a range of 25-32%

Factors that can offset a higher DTI:

1. Strong credit scores

2. Significant cash reserves or assets

3. Large down payment

4. Low payment shock (current rent vs new payment)