Financing in Canton>Question Details

Puflight, Home Buyer in Canton, MI

FHA approval question-will it pass underwriting?

Asked by Puflight, Canton, MI Sun Jul 5, 2009

Was wondering if my FHA loan app would pass underwriting. Front end ratio of 23.7% back end ratio of 44.6%. Our loan has passed the automated underwriting system and is the process of going to to the actual underwriter. My wife and I gross $9822.34 per month with $4387.52 debt payments each month including our new mortgage of $285,719 with a monthly payment of $2334.62. Our low mid credit score is 705. Our loan officer seems to think we shouldn't have a problem getting FHA approval. What worries me is that we were denied for a conventional loan. We plan on putting 3.5% or more if necessary up to about 10% down. Does anyone think this pass?

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Assuming you have asked this question of the lender already this lender must not like something about the income. Reasons the underwriter might be nervous might be income consistency? time in business? or maybe just that she is the only employee and it is a family member?

Audited financials are not a normal requirement but the underwriter must want some ""independent"" opinion. You might want to ask if a CPA review might work or something less costly to still get the job done.

More details: http://fhamortgageinfo.com/
0 votes Thank Flag Link Thu Jul 23, 2015
Keep in mind that part of the reason to get an FHA loan is that it's the only assumable interest rate loan on the market...that is going to have a lot of value in the years ahead... both of these sites seem to have useful info http://www.fhaprosllc.com and http://www.myfha.net
0 votes Thank Flag Link Fri Jun 4, 2010
Hi Purflight

The reason conforming loans with less than 20% down can no longer exceed 41% is because the PMI companies have instituted their own underwriting guidelines and won't insure those mortgages even if the lender approves the loan.

FHA does not have that problem because the govt insures those loans.

With respect to approval of higher DTI's, underwriters go off of something called the FHA TOTAL SCORECARD to evaluate the risk of a loan. What they are basically looking for is that a mortgage does not have MULTIPLE layers of risk such as high DTI and low credit.

If you passed automated underwriting and the only risk in the file is a slightly high debt to income ratio you should be fine
0 votes Thank Flag Link Mon Jul 6, 2009
Thanks for the responses guys! Makes me feel more at ease! We're currently in the underwriting process and should find out by Wednesday, keeping my fingers crossed!
0 votes Thank Flag Link Mon Jul 6, 2009
Puflight,

Bob below has a very good point, my experience has also been that underwriters are more comfortable with less down and reserve funds than more down and no reserves. I'd also recommend paying some of that revolving debt, especially if any is from high balance-to-limit accounts. There's nothing wrong with 3.5% down, take care of a little bit of that debt if you can. The truth is that you might be ok anyway, your file sounds strong as is. Good luck!

Kind regards,

Jason Diperstein
E Mortgage Management
800.793.9633 ext. 156
jdiperstein@emmloans.com
0 votes Thank Flag Link Mon Jul 6, 2009
hi again.....to be honest with you....it is my belief that they file with 3.5% down and having reserves that are not even required by fha is probably a stronger file that putting 10% with little to no reserves.....5% could be the magic number too.....your file is strong otherwise....one of the best ways to overcome high backend ratios is to have reserve money with a history of saving.....the only other consideration is to review your revolving debt (if you have any) and see what credit card you can pay off to lower the backend just enough to bring the ratios down....that money would have a much bigger impact on lowering your overall outlay every month than putting more $ down on the house..don't forget, revolving debt can be as much as 4 to 5 times higher per thousand than a 30 year fixed mortgage....keep in touch.....bob mcclure- sucess mortgage partners- plymouth, michigan.......
0 votes Thank Flag Link Mon Jul 6, 2009
Thanks for the responses. Unfortunately with only 10% down on the conventional loan we were still above the 43% back end ratio. I know with FHA the 43% is only a guideline and it can be exceeded. I've read somewhere online that some FHA loans have been approved up to a 55% back end ratio. So I'm hoping that since we are only slightly over that we can be approved!
0 votes Thank Flag Link Mon Jul 6, 2009
Couldn't you bring the other 1.6% down and make it 43% DTI?
Correct me if I am wrong ;)
0 votes Thank Flag Link Mon Jul 6, 2009
good morning.........you should be fine...........conventional financing with high backend ratios and low down is diffucult to do...........keep in touch.....bob mcclure...success mortgage partners- plymouth, michigan.........
0 votes Thank Flag Link Mon Jul 6, 2009
We were denied conventional due to our dti being too high. The cutoff was 43%. The mortgage is for a new build so we do not have the 10% saved up just yet, they had us on a savings plan and were also concerned with us having the down payment saved. We already have the 3.5% so I figured we'd just save and put down what we can and then have some reserves for other expenses that come up!
0 votes Thank Flag Link Sun Jul 5, 2009
Why were you denied for Conventional?
From my experience, you should be fine.

Yet, if you are willing to put 10% down, why not go Conventional and avoid the FHA fee?
0 votes Thank Flag Link Sun Jul 5, 2009
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