In Reviewing Borrowers Debt Obligations to Calculate Their Dti the Below Is Not Considered

Guide Resources

Access forms, announcements, lender letters, legal documents, and more than to stay current on our selling policies.

View Resources

B3-half dozen-02, Debt-to-Income Ratios (02/05/2020)

Introduction

This topic contains data on the employ of the debt-to-income (DTI) ratio, including:

DTI Ratios
Maximum DTI Ratios
Exceptions to the Maximum DTI Ratio
Calculating Total Monthly Obligation
DTI Ratio Tolerance and Re-Underwriting Criteria
Applying the Re-underwriting Criteria

DTI Ratios

The DTI ratio consists of 2 components:

full monthly obligations, which includes the qualifying payment for the subject field mortgage loan and other long-term and significant brusk-term monthly debts (encounter Calculating Total Monthly Obligation beneath); and
full monthly income of all borrowers, to the extent the income is used to authorize for the mortgage (see Chapter B3–three, Income Assessment).

Maximum DTI Ratios

For manually underwritten loans, Fannie Mae's maximum total DTI ratio is 36% of the borrower's stable monthly income. The maximum tin be exceeded upwards to 45% if the borrower meets the credit score and reserve requirements reflected in the Eligibility Matrix.

For loan casefiles underwritten through DU, the maximum allowable DTI ratio is 50%.

See B3-1-01, Comprehensive Take chances Assessment for information about the DTI.

Computing Total Monthly Obligation

The total monthly obligation is the sum of the following:

the housing payment for each borrower'south principal residence
- if the subject loan is the borrower's principal residence, use the PITIA and qualifying payment amount (see B3-6-03, Monthly Housing Expense for the Field of study Belongings);
- if there is a non-occupant borrower, use the mortgage payment (including HOA fees and subordinate lien payments) or rental payments (see B3-vi-05, Monthly Debt Obligations);
- if the discipline loan is a second home or investment property, use the mortgage payment (including HOA fees and subordinate lien payments) or rental payments (see B3-six-05, Monthly Debt Obligations;
the qualifying payment corporeality if the subject loan is for a 2nd abode or investment property (see B3-half dozen-04, Qualifying Payment Requirements);
monthly payments on installment debts and other mortgage debts that extend across 10 months;
monthly payments on installment debts and other mortgage debts that extend ten months or less if the payments significantly touch the borrower's ability to see credit obligations;
monthly payments on revolving debts;
monthly payments on lease agreements, regardless of the expiration date of the lease;
monthly pension, kid support, or maintenance payments that extend beyond ten months (alimony (simply non child support or maintenance) may instead be deducted from income, (see B3-half dozen-05, Monthly Debt Obligations);
monthly payments for other recurring monthly obligations; and
whatever internet loss from a rental property.

Note: Fannie Mae acknowledges that lenders may sometimes apply a more bourgeois approach when qualifying borrowers. This is acceptable every bit long as Fannie Mae's minimum requirements are met, and lenders consistently apply the same arroyo to similar loans. For example, a lender might calculate a higher minimum payment on a credit menu account than what Fannie Mae requires, which is adequate as long as the lender consistently applies this calculation to all mortgage applications with revolving debts.

DTI Ratio Tolerance and Re-Underwriting Criteria

Fannie Mae expects lenders to have in place processes to facilitate borrower disclosure of changes in fiscal circumstances throughout the origination process and prefunding quality control processes to increment the likelihood of discovering material undisclosed debts or reduced income. See D1-2-01, Lender Prefunding Quality Control Review Process.

As a event of the lender's normal processes and controls, the lender may need to re-underwrite the loan after initial underwriting. If the borrower discloses or the lender discovers additional debt(s) or reduced income after the underwriting conclusion was made upwardly to and concurrent with loan closing, the loan must exist re-underwritten if the new information causes the DTI ratio to increment by more than the allowed tolerances.

In all cases, if the lender determines that in that location is new subordinate financing on the subject property during the loan process, the mortgage loan must be re-underwritten.

Note: Re-underwriting means that loan casefiles must be resubmitted to DU with updated information; and for manually underwritten loans, a comprehensive chance and eligibility cess must be performed.

Applying the Re-underwriting Criteria

The following steps are required if the borrower discloses or the lender discovers additional debt(s) or reduced income after the underwriting decision was made up to and concurrent with loan closing:

Stride	Description
1	The lender must document the additional debt(southward) and reduced income in accordance with B3-half dozen-01, General Data on Liabilities or B3-3, Income Assessment, as applicable. Annotation: The lender is non required to obtain a new credit report to verify the additional debt(s). However, if the lender chooses to obtain a new credit report after the initial underwriting decision was made, the loan must exist re-underwritten.
two	If in that location is new subordinate debt on the subject belongings, the mortgage loan must be re-underwritten.
iii	The lender must recalculate the DTI ratio. For DU loan casefiles, the DTI ratio should exist recalculated outside of DU.
4	If the recalculated DTI ratio exceeds 45% for a manually underwritten loan or 50% for a DU loan casefile, the loan is not eligible for delivery to Fannie Mae. Manually underwritten loans: If the recalculated DTI does non exceed 45%, the mortgage loan must be re-underwritten with the updated data to determine if the loan is still eligible for delivery. Note: If the increase in the DTI ratio moves the DTI ratio to a higher place the 36% threshold, the loan must meet the credit score and reserve requirements in the Eligibility Matrix that apply to DTI ratios greater than 36% up to 45%. DU loan casefiles: See B3-2-10, Accuracy of DU Data, DU Tolerances, and Errors in the Credit Report for the tolerances and resubmission requirements associated with changes impacting the DTI. Loftier LTV refinance loans: For loans underwritten in accordance with the Culling Qualification Path, if the recalculated DTI ratio exceeds 45%, the loan is not eligible for delivery to Fannie Mae. If the DTI does not exceed 45%, just is increasing past 3 or more percentage points, the loan must be re-underwritten with the updated data to determine if the loan is still eligible for delivery.
5	The final loan application signed by the borrower must include all income and debts verified, disclosed, or identified during the mortgage procedure.
6	Upon delivery to Fannie Mae, the lender must deliver the qualifying monthly income and expense amounts that are on the concluding loan awarding. Encounter C1-2-02, Loan Data and Documentation Commitment Requirements.

Related Announcements

The table below provides references to the Announcements that accept been issued that are related to this topic.

Announcements	Result Date
Announcement SEL-2020-01	February 05, 2020
Declaration SEL-2019-07	Baronial 07, 2019
Announcement SEL-2019-04	May 01, 2019
Announcement SEL-2018-09	December 04, 2018
Announcement SEL-2017-06	July 25, 2017
Proclamation SEL-2016–07	August xxx, 2016
Annunciation SEL-2015–10	September 29, 2015
Announcement SEL-2015–06	May 26, 2015
Announcement SEL-2015–01	January 27, 2015
Announcement SEL-2012–10	Oct 2, 2012
Declaration SEL-2012–07	August 21, 2012
Annunciation SEL-2011–13	December twenty, 2011
Announcement SEL-2011–12	November fifteen, 2011
Announcement SEL-2010–13	September xx, 2010
Announcement 08-35	December 18, 2008

Have You Tried Ask Poli?

Poli knows. Just inquire.

Inquire Poli features exclusive Q&Every bit and
more—plus official Selling & Servicing
Guide content.

Try Inquire Poli

B3-6-05, Monthly Debt Obligations (12/16/2020)

IntroductionThis topic describes obligations that should be considered in underwriting the loan, including: Alimony, Kid Support, and Separate...

B3-6-06, Qualifying Impact of Other Existent Manor Endemic (06/30/2015)

Introduction This topic describes the qualifying bear on of other existent manor endemic, including: Qualifying Considerations Mortgage Assumption ...

Cheong Cheok Hong Trandaste