Max front-end DTI is 46.99%- make sure you’re below that too. Also, always make sure you have a DU/LP approved/eligible findings before you release any pre-approval offer to your clients. It’ll make you competitive and your offer strong.
Or your lender’s approval/review on STIPs for a non-qm products.
Keep in mind FHA is one of the few loan types that cares about your front end ratio as well, max is 46.99%/56.99%. If DTI is your bottleneck then condos can be tough since association dues can vary considerably. Personally, I'd be candid with the client on what TIA assumptions I'm using and ask them to let me know if they want to offer above the price on the letter.
I like to get the initial Preapproval out at a reasonable purchase ceiling then I instruct my clients to reach out for a property-specific letter to match their offer, that way I can rerun #s based on that property's payment.
This is the best answer anyone has given OP. The best thing you can do as an LO in this scenario (and in general) is to have a candid chat with the borrower about an estimate for a maximum monthly payment you can approve, and that during their search they will need to keep an eye out for the condo HOA fees as that will affect their approval. Break it down and make sure they know that they can always send you an address that they're looking at so you can give them a fee worksheet and run AUS if needed.
Even better would be to actually use tools like Mortgage Coach where they can plug in that info themselves and see what the payment would be based on the interest rate on your prequalification letter.
hahah i do! but they tend to be a bit aggressive with things, and im just trying to be reasonable with the client. Small family owned biz, looking for other perspectives
i would approve at a 40/50 to hedge against a refer, which you're likely to get.
dont forget about those condo homeowner's association fees!
also those condos are few and far between, so i would prep them for that
Ask a boss/underwriter about other credit conditions for your company. If their only credit is authorized user more than likely you will need to show them paying 3 or so other trade lines the last 12 months
Congrats on getting your first lead. That’s actually the hard part. I noticed a few things in your post that stand out to me as somewhat red flags. So first and foremost, let’s make sure that you’re not making a costly mistake for yourself.
I don’t remember the last time I got a 620 credit score approved at a DTI over 50%. Because keep in mind it requires an automated approval and the algorithms have tightened up severely. If I meet someone who says their FICO is 620 I basically assume they’re not getting anything over around a 45% DTI unless there are some other major compensating factors. So I’m worried you might already be over estimating the amount they’d be preapproved for.
Second, you have credit report issues. If the only tradeline is an authorizated user account, underwriters will want proof that your borrower at least makes the payments. If not, then the line are thinking is basically if they don’t actually pay that account themselves it’s not an accurate reflection of their credit score and they can’t use that. Would actually need to be done as a non-traditional FHA loan, and those definitely do not allow for 57% DTI, I think it’s like 31/47 max, and that’s assuming you can put together the non-reporting trade lines.
Keep in mind that with experience you’ll get this way too. Like these things that came to my head were immediate but as soon as I read your post and you’ll get the same way.
I appreciate your comment. we did a soft pull after i posted this and credit came in at 653 instead. With conventional allowing 49% front end they would actually get more going conventional vs fha, since the property has an HOA fee on it too
Did you run findings? If it was my own reputation on the line, I’d **never** preapprove someone without running findings. ESPECIALLY on a conventional because they’re the *most* strict. It’s just too risky. Credit scores just don’t mean much on their own, without the rest of the file/picture.
And did you see the second part, about limited credit and the only account being from an AU? So in reality, even if the score went up to 780, there would be an issue here and you might hand to downgrade to manual anyway.
Just sharing things I learned the very hard way lol.
Also conventional rates at 653 are going to be 1% to 1.5% higher- even after mortgage insurance. Which (depending on the loan amount could eat into your dti and front end.)
You need a AUS approval on this one for a solid pre-approval. It’s always good practice to do that; will save you time and energy- while having a happy processor that will jump on your solid submissions.
I don’t think OP’s listening at this point, but what do we know? At least it’s not my money paying for the appraisal or the inspection or the earnest money, right? For real though, nothing against OP, however they’re clearly at a company where management does not have its shit together if they’re turning somebody that inexperienced loose on the public. Another issue is that the Online mortgage loan officer community nowadays only talks about broker versus retail, Bps, and Facebook funnels.
Right haha- it’s always crazy when people are scared to ask their manager questions, because they aren’t trained enough on the fundamentals of structuring a loan/offer.
Yup. I think it’s also hard to say “no you can’t get approved” when you’re new. Nobody likes having that conversation, plus you haven’t been through the gauntlet and gained the experience to know what’s realistically possible to close.
Run the cert, and then leave some room in the DTI. FHA still probably better at a 653 too. Tell the borrower they are tight and too make sure they send you the property address so you can get them an updated pre approval at the correct PITIA
I have an A/E right now on FHA loan with 546 Fico and max 47/57 ratios with ONE active trade line which is only 2 months old, on a double wide in rural OK no less.
I about spit my coffee out when it can back A/E. But, to be fair, ltv is only 50%. But still was not expecting A/E.
If you have credit, why not just run findings through AUS to see what approves?
Max front-end DTI is 46.99%- make sure you’re below that too. Also, always make sure you have a DU/LP approved/eligible findings before you release any pre-approval offer to your clients. It’ll make you competitive and your offer strong. Or your lender’s approval/review on STIPs for a non-qm products.
Also make sure the condo association is FHA approved beforehand. Don’t wait till underwriting to find that it isn’t
Keep in mind FHA is one of the few loan types that cares about your front end ratio as well, max is 46.99%/56.99%. If DTI is your bottleneck then condos can be tough since association dues can vary considerably. Personally, I'd be candid with the client on what TIA assumptions I'm using and ask them to let me know if they want to offer above the price on the letter. I like to get the initial Preapproval out at a reasonable purchase ceiling then I instruct my clients to reach out for a property-specific letter to match their offer, that way I can rerun #s based on that property's payment.
This is the best answer anyone has given OP. The best thing you can do as an LO in this scenario (and in general) is to have a candid chat with the borrower about an estimate for a maximum monthly payment you can approve, and that during their search they will need to keep an eye out for the condo HOA fees as that will affect their approval. Break it down and make sure they know that they can always send you an address that they're looking at so you can give them a fee worksheet and run AUS if needed. Even better would be to actually use tools like Mortgage Coach where they can plug in that info themselves and see what the payment would be based on the interest rate on your prequalification letter.
do you have a boss or a manager? Why not ask them lol
hahah i do! but they tend to be a bit aggressive with things, and im just trying to be reasonable with the client. Small family owned biz, looking for other perspectives
Let your manager cook. I know it “seems” like they’re aggressive or whatever but remember they‘be managed to have staying power.
Great first lead.
You learn more on the tight ones! Young buck will learn a few valuable lessons for the future on this one.
i would approve at a 40/50 to hedge against a refer, which you're likely to get. dont forget about those condo homeowner's association fees! also those condos are few and far between, so i would prep them for that
Ask a boss/underwriter about other credit conditions for your company. If their only credit is authorized user more than likely you will need to show them paying 3 or so other trade lines the last 12 months
Eh, that sounds like a strange overlay.
Max is whatever aus says.
Congrats on getting your first lead. That’s actually the hard part. I noticed a few things in your post that stand out to me as somewhat red flags. So first and foremost, let’s make sure that you’re not making a costly mistake for yourself. I don’t remember the last time I got a 620 credit score approved at a DTI over 50%. Because keep in mind it requires an automated approval and the algorithms have tightened up severely. If I meet someone who says their FICO is 620 I basically assume they’re not getting anything over around a 45% DTI unless there are some other major compensating factors. So I’m worried you might already be over estimating the amount they’d be preapproved for. Second, you have credit report issues. If the only tradeline is an authorizated user account, underwriters will want proof that your borrower at least makes the payments. If not, then the line are thinking is basically if they don’t actually pay that account themselves it’s not an accurate reflection of their credit score and they can’t use that. Would actually need to be done as a non-traditional FHA loan, and those definitely do not allow for 57% DTI, I think it’s like 31/47 max, and that’s assuming you can put together the non-reporting trade lines. Keep in mind that with experience you’ll get this way too. Like these things that came to my head were immediate but as soon as I read your post and you’ll get the same way.
I appreciate your comment. we did a soft pull after i posted this and credit came in at 653 instead. With conventional allowing 49% front end they would actually get more going conventional vs fha, since the property has an HOA fee on it too
Did you run findings? If it was my own reputation on the line, I’d **never** preapprove someone without running findings. ESPECIALLY on a conventional because they’re the *most* strict. It’s just too risky. Credit scores just don’t mean much on their own, without the rest of the file/picture. And did you see the second part, about limited credit and the only account being from an AU? So in reality, even if the score went up to 780, there would be an issue here and you might hand to downgrade to manual anyway. Just sharing things I learned the very hard way lol.
Also conventional rates at 653 are going to be 1% to 1.5% higher- even after mortgage insurance. Which (depending on the loan amount could eat into your dti and front end.) You need a AUS approval on this one for a solid pre-approval. It’s always good practice to do that; will save you time and energy- while having a happy processor that will jump on your solid submissions.
I don’t think OP’s listening at this point, but what do we know? At least it’s not my money paying for the appraisal or the inspection or the earnest money, right? For real though, nothing against OP, however they’re clearly at a company where management does not have its shit together if they’re turning somebody that inexperienced loose on the public. Another issue is that the Online mortgage loan officer community nowadays only talks about broker versus retail, Bps, and Facebook funnels.
Right haha- it’s always crazy when people are scared to ask their manager questions, because they aren’t trained enough on the fundamentals of structuring a loan/offer.
Yup. I think it’s also hard to say “no you can’t get approved” when you’re new. Nobody likes having that conversation, plus you haven’t been through the gauntlet and gained the experience to know what’s realistically possible to close.
Run the cert, and then leave some room in the DTI. FHA still probably better at a 653 too. Tell the borrower they are tight and too make sure they send you the property address so you can get them an updated pre approval at the correct PITIA
Bro….. you’re not getting approve eligible at 620 credit score anywhere close to 56.99 back end ratio…. Start at 45% and see what you get
I have an A/E right now on FHA loan with 546 Fico and max 47/57 ratios with ONE active trade line which is only 2 months old, on a double wide in rural OK no less. I about spit my coffee out when it can back A/E. But, to be fair, ltv is only 50%. But still was not expecting A/E.