Debt Ratio – Loans with AUS Approve/Eligible – follow AUS decision.
Credit scores of 640 and under and DTI greater than 43% regardless of AUS decision require explanation for derogatory credit and a VOR or rent free letter (if applicable).
Manually underwritten loans with FICO score> 580 may exceed 31°/o/43°/o ratios with acceptable compensating factors (Energy Efficient Homes, Verified and Documented Cash Reserves, Minimal Increase in Housing Payment, No Discretionary Debt, Significant Additional and Income Not Reflected in Effective Income and Residual Income)
Refer to the FHA mortgage lenders FHA Underwriting Guidelines for applicability. Manually underwritten loans with FICO score 500 – 579 or non-traditional credit may not exceed 31 %/43% ratios regardless of compensating factors.
Refer to the FHA mortgage lenders FHA Underwriting Guidelines for maximum ratios for manually underwritten loans.
FHA COMPENSATING FACTORS What are FHA compensating factors? (FHA compensating factors are the stronger elements of a credit application that it offsets something weaker in the application) but it’s more complicated than that. Different FHA Lenders manage the consideration of compensating factors in different ways. FHA’s written guidelines outline specific examples of what FHA compensating factors…