Banks Are Lending, If You Can Afford It

I have been saying this for the longest time now and I am glad someone else wrote about it.  The unfortunate part for residential lending is that some can still buy even if they cannot afford it.  Fannie Mae recently revised their debt to income ratios down, that’s right, I said down, to 45% and a maximum of 50% with compensating factors.  A compensating factor would consist of credit score, reserves, etc.  It will be to the underwriter’s discretion. 

So where should you be at with a debt to income ratio?  It all depends.  Mortgage Professionals should be like Financial Planners and take into account other expenses, not just what is on their credit report.  I am talking about insurance, children, groceries, etc.  I guess if I were to use a percentage I would say to keep your total debt to income ratio around 36%.  

I absolutely loved this quote because I have been telling my clients that I am not just asking for this documentation due to the housing mess.  It has always been required on Conventional and government loans. 

“We really haven’t changed our lending criteria in the last five years,” Wilmoth says. “The only thing that has changed is the number of qualified borrowers.”