IF you have more questions for me you can send a private message here on Trulia or to firstname.lastname@example.org
530 320 3032
In an underwriting analysis a low debt-to-income Ratio (DTI) is a positive thing. When looking at the factors in an approval (or decline) - credit (your history of making payments), capacity (your income/assets/ability to repay the loan), and collateral (how much the home is worth) - a low DTI can compensate for a lower credit score or higher loan-to-value ratio (LTV).
However it will not make any difference if the loan does not meet certain requirements. Lets say the loan program requires a minimum FICO score of 640 and the borrower's score is 619, even if their DTI was 10% it would not help because the loan does not meet the minimum standards.
The VAST majority of mortgages these days are underwritten by automated systems such as Fannie Mae's Desktop Underwriter or FHA's Total Scorecard. These take in the minimum requirements of the loan but also the strengths and risks when it comes to credit score/history, debt ratio, assets, and loan to value ratio. These systems have built in algorithms that work together to determine if a loan can be approved or not. This is where a relatively low DTI will be very helpful and can compensate for risks in other areas such as certain credit issues or a low down payment/lack of equity.
If a loan cannot be approved by an automated system it can often also be manually underwritten. In this case it is also very helpful to have a low DTI. In this case the underwriter will use it as a compensating factor when approving (or declining) the loan.
So the answer really is; it depends. But yes, sometimes a lower debt ratio can be the difference between an approval or not.
Mortgage Advisor - 16 Years Experience
Lenders look primarily at 3 things:
Your track record of paying your bills,
You Debt/Income ratio
If you need a Mortage person you can trust;
call Dominic Sylvestri; he's in Northern California
Shane Milne | Lending in all 50 states | NMLS #81195