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Old 02-22-2012, 11:02 AM
 
Location: Wandering in the West
797 posts, read 986,378 times
Reputation: 869
Default Do lenders care if your back end ratio is a little high?

For instance, if the ratio they use is 28/36, will they turn me down if my back end ratio is 11% or just lower my front end allowance accordingly?

I have credit scores above 800 and the total of my current bills + the new house PITI would only equal 26% of my gross monthly income. But 11% of that would be on the back end of the ratio.
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Old 02-22-2012, 09:22 PM
 
Location: MID ATLANTIC
3,756 posts, read 7,484,344 times
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You don't say what kind of loan you are obtaining (conventional vs government), but it's tied to down payment.

FHA, try to keep it below 45%, but in some cases over 45% is fine.

Conventional, almost all are limited to a 45 back ratio (the total debt ratio is what counts)

It looks like you are fine.
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Old 02-23-2012, 03:03 AM
 
Location: Wandering in the West
797 posts, read 986,378 times
Reputation: 869
Thanks, SmartMoney. I prefer a conventional (15 yr.), so we don't have to pay PMI, and I'm only shopping at small banks and credit unions. But I'm not sure if we'll have the 20% down in time. If not, I would probably try for NFCU's Homebuyers Choice mortgage. They advertise it as having no PMI, but I believe they're just charging a fee for it up front. NFCU uses a 28/36 ratio, last time I looked.

My back end ratio is actually at 17%, so I'm using a chunk of our savings to pay down the truck loan this week. The amount I spend to pay it down will be about the same as the reduction in reserves I'll be required to have, but it leaves me less for a down payment.
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Old 02-23-2012, 10:36 AM
 
Location: Wandering in the West
797 posts, read 986,378 times
Reputation: 869
Oh, I just realized I've been figuring my ratio wrong. My total PITI on the new house would be 11% of monthly gross pay and my total bills right now + the new house would be 31%, so if that's correct, and my ratio is 11/31, then I don't need to pay down the truck payment.

I copied down bad advice on which ratio included what, but a google search just straightened me out. Maybe I can make the 20% down payment after all... if they count my rollover IRA as reserves. I can pull it out if necessary.
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Old 02-23-2012, 01:43 PM
 
Location: Lead/Deadwood, SD
870 posts, read 1,264,097 times
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I wouldn't recommend letting your banker close enough to your back end to check your ratios...
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Old 02-23-2012, 04:52 PM
 
Location: Wandering in the West
797 posts, read 986,378 times
Reputation: 869
Like I said... I can pull it out if necessary.
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