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Maximum DTI for a conforming loan 43%, but getting conflicting answers from brokers

I want to get the $417,000 conforming loan and I understand that max DTI allowed is 43%.
Some brokers tell me that's that the max dti for total debt and the dti for housing cost is lower around 36-38%. Others tell me that this "front-end" dti doesn't matter and the 43% is the only ratio that counts.
I have no debts and FICO 790+. I will be putting down 10% on the property and paying closing costs cash.
So, which DTI will really be used when underwriting a loan? For me the difference between 38% and 43% is an absolute dealbreaker. 
  • December 29 2013 - Valley
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Answers (7)

Best Answer

I would estimate you need $7150 a month in gross income to qualify using a 43% debt to income ratio.

$7150 x 43% = $3074   minus $2113 (P+I payment for a loan of $417,000 at 4.5%) and $950 for taxes, insurance, MI (based on your answer)

 A lender can take your application, review your income documents, pull your credit, and run the automated approval through DU or LP and let you know for sure.
  • December 30 2013
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Profile picture for c3511013
Thank you Brian,

I got the same numbers.

Couple of more questions for the pros here:

Is year-end end bonus from S-Corp (100% owner) considered qualifying income? It will be on W-2.
But no other W-2 salary during the year, only profit distribution.

Is it possible to run the numbers thru DU without actually pulling credit and getting a hard inquiry?
Reason being, 2013 returns won't be filed until at least 3 months from now and work commitments for the next 3 months. So don't want another hard inquiry after 3 months.
But for 2013 tax planning, I would like to have better qualifying income estimates.
  • December 30 2013
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@brookstone

Sorry, forgot to include this info:

SFR, townhouse
$470,000 sales price (10% down, closing costs will pay cash)
All additional housing costs, taxes, insurance, pmi, etc will be approx $950/month
APR 4.5 ( I meant APR by rate) or whatever is prime since I have 790+ FICO. I'm not gonna buy down any points.
No other debt like I said before

How much qualifying income do I need to show?

Obviously I'll be talking to a lender, but want to get some advice here too
  • December 29 2013
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"So, how much should my qualified income be to get the max $417,000 loan?"
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That is impossible to answer. We don't know what property you are buying so therefore we have no idea what your insurance will be or what your property taxes will be. You will need some type of mortgage insurance and you have not specified what type you will have. I can't guess what type because you quoted a 4.45% interest rate and that's not a valid note rate. We would only be guessing that you are quoting an APR and that doesn't give the information needed to calculate a payment. 

Do yourself a huge favor and find a competent loan officer to go over all of this with you, it's not something you can shortcut on an advice forum. If you are uncomfortable with your current loan officer, you should find a different one.
  • December 29 2013
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Thank you for your answers.

I have no debt, so my dti now is zero.

So, how much should my qualified income be to get the max $417,000 loan?
Assuming current rate of 4.45%

  • December 29 2013
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You're getting conflicting answers because different lenders have different overlays. The brokers may also be calculating your income differently. The max DTI will be determined by the AUS like Wayne said. 
  • December 29 2013
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Until 1/14/14 the automated underwriting system  (DU or LP) will determine the max DTI and likely 45% would be maximum. After 1/14 the 43% DTI will be Agency max DTI.
What is your DTI?
  • December 29 2013
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