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

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!

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

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.......

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!

Couldn't you bring the other 1.6% down and make it 43% DTI?
Correct me if I am wrong ;)

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.........

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!

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?