Mortgage Debt to Income Questions/Advice?

My fiancee and I are getting married and we are selling both of our houses and moving into newly constructed one. Both existing houses are on the market right now, and my hope is that they will sell before the new home is finished.

In the event that they do not sell at the time I need to start securing financing on the new house... I am trying to figure out worst case scenario, and need to know what is the highest debt to income ratio a mortgage company will accept for a mortgage on a new home.

If neither house sells, and I carry 3 mortgages the debt to income ratio is 52%... if one sells.... I can get it down to about 43%.... can I get a mortgage with these debt to income ratios?

I am not worried about cash flow persay... because this should be a short term problem (whatever that means)... but I need to know what can I qualify a mortgage for.

Does any one have any suggestions on strategies for managing a situation like this?

Just make sure your lender is NOT using a subprime company that has a DTI limit of 55.49%. You don't need that, and it wouldn't be much of a benefit since their rates are very high.

Assuming your credit is pretty good, Fannie Mae's underwriting system has been, at least up til last week when they updated their underwriting engine, regularly allowing DTI's up to 65%. No kidding. 100% financing with 620 scores at 65%, all day long.

So if you have any downpayment, better than 620 scores, you should be just fine.

Also, and few brokers know this, if your home isn't sold, but is under contract, with a few extra steps (basically must prove your buyer is fully approved with appraisal for buying your home), you can exclude that debt even if it hasn't closed quite yet. This could help in a pinch, if at least one of the homes is under contract by then.

But 52% is, unfortunately, pretty normal for people, without having 2 extra houses they're qualifying for.

Feel free to email me through here with any questions.

I would suggest checking out several lenders as there not all the same. You should have no trouble getting that loan with the equity but all lenders are not the same. Some charge points or incorperate fees that are actually points into the loans. By going to several lenders and not what you might see on TV by going to a loan broker. go to several lenders and put your cards out on the table and have them explain what they can do for you. You may save Several Thousand by doing so.

There are two things to consider here. One is what is the maximum debt ratio that is allowed? Two is how long are you comfortable making 3 mortgage payments if your house doesn't sell. With my experience in the industry, the maximum debt ratio can vary significantly with factors that include credit score, down payment, type of loan. With the use of automated underwriting systems such as DU/LP etc, I have personally seen debt ratios in the 65% range get approved. That being said, that will make for a difficult financial pinch if the house didn't sell as fast at you hoped. I would first figure out your budget, if you having any emergency fund or savings, and plan around that versus maxing out what you qualify for. It would be a shame to destroy your credit with a few late payments.

Andrew,

The good news is that I deal with a couple of companies that will do up to 55.49 DTI. However, the interest would not be favorable. With that said, it's just like you said, a short term fix. You can always refinance. I can help!

msmith@premierloangroup.com

Marty