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June 22 2022

DTI Broker Advantage with Compensating Factors

The Debt To Income ratio is the most important guideline that must be met for a loan. Compensating factors exist, however, and allow much more flexibility and provisions to individuals looking to finance a new home purchase.

Debt-To-Income Basics for Home Mortgages

There are other factors to consider when obtaining a loan, but this is a good place to start. The Home Loan Program Basics guide on the Resources page of the website lists the standard guidelines for DTI. DTI is short for Debt-To-Income ratio. A borrower is someone who buys a property with borrowed money. If that borrower does not earn enough income to cover the mortgage payment, all other debts, and have a general amount left over to cover daily expenses, then the DTI will be too high and the bank or lender will not close on the loan.

Conservative DTI Lending Ratios

Since banks usually hold a conservative lending position, they may not lend above 38%, or they may only extend to 40% on a conventional loan. A bank may go higher, but keep in mind, the higher the percentage of Debt compared to a borrower’s income means that there will be less margin for that borrower to live, eat, save, etc. Therefore, lending to lower DTI borrowers is a much safer and conservative risk since those borrowers have a much easier time meeting all of their mortgage payments. This is also why a lender might risk lending to a high credit score borrower who has a high DTI, because  they have proven that they know how to manage and pay their debts on time.

If you are someone you know may be looking to buy, sell, or refinance, give me a call, I would love to help with any residential and commercial lending needs.

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Funding Juicy Solutions LLC

T: 619-402-9221
email: info@fjsolutionsllc.com

NMLS# 2269838

DOWNLOAD | GUIDE TO HOME LOAN PROGRAM BASICS FOR MORTGAGE LENDING
DOWNLOAD | GUIDE TO UNDERSTAND CONFORMING LOAN LIMITS