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Different debt ratios for conforming loans vs. conforming "jumbo" loans?

Profile picture for CA Pioneer
We are looking for a house in high cost area where the current limit for a conforming loan has been raised to $729,750. One local mortgage lender we are talking to is happy to prequalify us for a conforming loan of $417,000, but is indicating that we might not qualify for a conforming high loan limit mortgage because is has lower debt to income requirements. He is basically treating it like a traditional jumbo loan. We do have the income (and no debt) to qualify for more than $417,000 assuming that the debt to income ratio remained the same.

Can anyone confirm that there are indeed different debt to income ratios for conforming loans vs.conforming high loan limit mortgages aka conforming "jumbo" loans? Or do we have a reluctant lender and should look elsewhere?

Thank you very much
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November 03 - US

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Profile picture for Bentley Advisors
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It really all depends on your specific scenario. Currently, there are lenders that allow for debt ratios as high as 65% on the Conforming Jumbo loan amounts. This is not the norm and would require strong compensating factors such as large down pymt, strong cash reserves, exceptional credit score, etc. This is going to change, however, sometime in Dec. Fannie/Freddie has announced they will cap at an absolute max of 50%. I would suggest you speak w/ a competent broker who should be able to guide you to the best lender that allows for the higher debt ratio w/ Fannie approval. Most retail banks will not allow a penny over 45%. Also, you will need to move quickly as there is a deadline.
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November 03
Profile picture for Gregorio Denny
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Your question actually does not make sense. If you qualify at 417K with one DTI, your DTI will certainly be higher by the properties of simple mathematics at $729,750. What exacty are you asking? It would be impossible for you to have 2 different loan amounts and the same DTI.

Did you consider that you are not being qualified for the higher limit because a higher loan amount raises your DTI and thus disqualifies you, not that there is a higher DTI restriction on high balance conforming loans?

Am I missing something?
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November 03
Profile picture for CA UMB
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On GSE loans the maximum DTI ratios are the same. As Greg pointed out, the higher your loan amount, the higher ratio of debt. The more you put down will lower your debt ratio.
 
Most any broker will pre-qualify you. Very few brokers like to work for free. I don't think this is a case of a "reluctant lender." They probably don't take on borrowers if there's only a prayer of a chance the loan will get funded.
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November 04
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the agencies don't have different DTI requirements for conforming high balance loans; however some lenders have imposed their own DTI requirements on them.
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November 04
Profile picture for smokey1999
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As stated in other replies, as the loan amount goes up, so does your payment, which would increase your DTI.  Every lender will have different criteria for how high a DTI they will accept.  There can be other compensating factors such low LTV or excellent credit.
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November 04
Profile picture for CA Pioneer
Thank you very much for all your replies. This is very helpful.

Some quick clarifications.

We are selfemployed (and have 800+ credit score and a large down payment). We were pre-qualified for $417,000 based on the assumption that our 2008 returns would be identical to our 2007 returns (we filed late...another story). Our 2008 numbers turned out to be significantly better than our 2007 when we eventually filed (even when you keep in mind that it gets averaged over 2 years). The bank acknowledges that we have a higher income, but they still qualified us for the same amount, giving the reasons that a conforming high loan limit mortgage requires a lower debt to income ratio. Nothing else in our financial picture did change, so naturally we expected a slightly higher amount. (I do fully understand that a higher mortgage will change the DTI ratio, but that is not really the question. )

And yes, it's a retail bank we are talking to, so I assume that this could be their own DTI requirements for conforming high loan limits. Tim, thanks for confirming that Fanny/Freddie don't have different DIT requirements.

I think we'll follow Danny's advice and speak to a broker.
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November 04
Profile picture for ColoradoLender
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CA Pioneer---


You should definitely look elsewhere and contact the top rated lender in your state which is Greggorio Denny who posted in this thread.  Best of luck.

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November 04
 

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