How can a USDA Debt Ratio Waiver increase your maximum sales price?
What happens if your qualifying budget needs a little boost in order to qualify for a home that seems to be just out of reach? What if you were just denied for a loan because your USDA debt-to-income ratios were too high?
In these situations, a USDA Debt Ratio Waiver can help, and in today’s video we will explain the factors needed in order to increase your USDA qualifying ability.
And don’t forget, we are known for keeping Realtors and homebuyers updated through each step of the process from pre-qualification to closing along with one easy point of contact.
How can a USDA Debt Ratio Waiver increase your sales price?
As a starting point, your debt-to-income ratios (debt ratios) are calculated by dividing your new mortgage payment (housing expense) against your monthly gross income and also by dividing your total monthly debt payments by that same income.
Now, the housing portion of your debt ratios are referred to as your PITI payment and include monthly amounts for items such as your principle and interest, taxes, insurance, etc., while your total debt ratio consists of that housing expense plus additional monthly debt such as any auto loans, credit cards, or student loan payments.
Also, USDA published guidelines allow 29% for housing and 41% for your total expenses (29/41), but expanded ratios of up to 32% for housing and 44% for total (32/44) are available provided that:
The qualifying credit score of all applicant(s) is 680 or greater, and one of the following compensating factors is identified on a purchase transaction:
- The proposed PITI payment is equal to or less than the applicant’s current verified housing expense for the past 12 months which can be verified through sources such as an eligible verification of rent, credit report, or 12 months of cancelled checks; or
- Mortgage reserves are funds that are available after closing and provided at least 3 months of PITI reserves can be verified from an eligible source, this can be used as a compensating factor, but remember cash on hand is not eligible; or
- If all employed applicants have been continuously employed with their current primary employer for a minimum of 2 years, but this is not an eligible factor for applicants that are self employed.
Additionally, because Debt Ratio Waivers are only applicable on manually underwritten loans, make sure you lender is able to work with USDA manual underwriting files for those loans that do not receive a GUS Accept.
In summary, don’t get pulled into the weeds on the details, just understand that by having at least a 680 score and meeting one of the factors we discussed, this can provide for an immediate boost to your qualifying ability, but make sure you are working with a USDA Approved Lender that truly understands how to maximize USDA qualifying guidelines.
We realize USDA qualifying guidelines can be complicated, but that is where we step in to help. My team is built to help walk homebuyers through the USDA process step by step.
Just simply call or email to discuss your scenario, schedule a convenient call back time, or complete our 1-2-3 online pre-qualifier to get started.
I want everyone to make it a great day, and look forward to seeing you right here for the next tip of the week!