Question: Are their any workarounds for a high debt to income ratio when getting qualified for a home loan?

(Posted by: Reg on 2010-03-11 08:37:58)

Trying to purchase a duplex to live in one side and rent the other side. Lenders wont approve because of my high debt to income ratio. A high Child support payment is killing me. My Fico score is 726 , so I know i should be able to get a good rate. Any suggestions?

Posted by: George McCasland on 2010-03-11, 15:40:14

Run it past the membership at Dads House to see if anyone has a suggest who has tried the same thing. dads-house.org/ \\\\\\\\\\\\\\

Posted by: WRG on 2010-03-11, 08:43:04

Get rid of some debt or make more money.

Posted by: nomo on 2010-03-11, 08:43:23

You need to wait until you make more money or pay off other debts so child support is your only debt.

Posted by: Realtyyoudefine on 2010-03-11, 08:45:36

Make a larger down payment: like 50%. Demonstrate you have a large amount of liquid assets. Use other property as collateral. Pay off your debt or increase your income. Buy a cheaper place. Sorry, no magic bullet the guidelines are pretty strict.

Posted by: G N A on 2010-03-11, 08:48:11

You really do know the answer to this, pay down your debt load. If there's any unsecured debt, pay that off as soon as possible. One word of caution, do not shop lenders. Here's why: Each time someone pulls your credit report at your request, your score goes down. I don't know what your down payment will be, however have you considered going to the property owner direct and asking for a lease option on the property? If it's a bank REO, there may be a way to make it work for you both if you have some money going into the deal.

Posted by: Mr. Fix-It on 2010-03-11, 08:49:56

This is a tough spot and your credit is very good..You need to show some more income somehow--perhaps a second job for now to push this through....They may also be considering a credit to debt ratio...Ideally you don't want to have more then 30% of your lines charged..if t he numbers look rough in that department you need to pay them down some-or get your creditors to up your limits-which will drop your debt to credit ratio.

Posted by: Bruce Qualters on 2010-03-11, 08:53:38

In this situation depending on where your ratios are at would be the determining factor. You can probably get to ratios of like 40/ 50 maybe higher if you go FHA depending on reserves down payment etc. You should be able to have the duplex appraised and have the fair market rent given for the second unit and have that considered in offsetting the payment. (Assuming it is a real two unit metered separately etc.) Other things you can do would obviously be to pay off debt. Mortgage companies will generally not allow you to pay down CC debt any more to improve the ratios but you can pay them down before you apply and they will not count. If you have 10 mos or less on any installment debts they can be removed from your ratios so maybe pay down a car loan to less than 10 payments left or if your child support is getting close to that point. you could look at the option of paying buy down points to reduce your interest rate consequently your payment and debt ratios. Finally a cosigner can add income to both an FHA and a Freddie backed loan. Without having all the details impossible to determine if you can move your ratios enough though these are some methods that I look at when I have a close to the line situation. A second job will be of no use need to have the income for 2 years to use it in the ratios. Always always shop lenders. You do not need them all to pull your credit to get a price quote. The effect multiple inquiries has on your report is minimal it will very rarely make the difference in the price you see. Though there is a small effect to having inquiries on your credit the potential loss you face but not shopping is ridiculous to even consider not shopping around. That being said never shop on the internet to many scams.

Posted by: golferwhoworks on 2010-03-11, 09:17:37

If you have debts that are not revolving and are just loans. You can pay them down to less than 9 months to have them excluded from the debt ratio. Or as every one else has said pay off the revolving accounts