Monday, April 26, 2010

Max FHA Debt to Income ratios.

I was going back through some old posts and I realized I never shared my FHA findings after seeing articles like this last year where very marginal buyers were getting very high DTI loans. It turns out with automated underwriting you can get a max front end ratio of 46.99% and a back end ratio of 56.99%. It is amazing the debt load the FHA will allow for its borrowers and it is no wonder why FHA will need to be bailed out sometime in the not so distance future.

One may ask why they have determined the maximum affordable payment for HAMP mods is 31% (front end) on one hand but on the other FHA allows up to 47%. The FHA says it requires "compensating factors" (a few months worth of savings or things like a higher than minimum down payment) to get those DTI ratios but some of the compensating factors appear that they can easily be gamed.

1 comment:

Travis Bickle said...

But Barney Frank says it isn't subprime when it's "policy."

Phew, I feel so relieved.