Introduction

This subject contains info on the usage of the debt-to-income (DTI) ratio, including:

DTI Ratios

The DTI ratio is comprised of two components:

total monthly bills, which include the payment that is qualifying the topic home mortgage along with other long-lasting and significant short-term month-to-month debts (see Calculating Total month-to-month Obligation below); and

total month-to-month earnings of most borrowers, into the degree the income can be used to be eligible for the home loan (see Chapter B3–3, Income Assessment).

Optimum DTI Ratios

For manually underwritten loans, Fannie Mae’s maximum total DTI ratio is 36% associated with borrower’s stable monthly earnings. The most may be surpassed as much as 45% in the event that borrower satisfies the credit score and reserve demands mirrored into the Eligibility Matrix.

The maximum allowable DTI ratio is 50% for loan casefiles underwritten through DU,.

Exceptions towards the Optimum DTI Ratio

Fannie Mae makes exceptions to the most allowable DTI ratios for particular home loan deals, including:

cash-out refinance transactions — the maximum ratio could be reduced for loan casefiles underwritten through DU (see B2-1.3-03, Cash-Out Refinance deals);

high LTV refinance deals – aside from loans underwritten underneath the Alternative Qualification Path, there are not any DTI that is maximum ratio (see B5-7-01, High LTV home mortgage refinance loan and Borrower Eligibility);