48% DTI?

so i went to talk to the b of a loan lady at san mateo today and i was under the assumption that the old standards of 28/35 debt to income were being used to qualify borrowers.  i was surprised to hear the lady say, "we only look at back end dti now and it can be as much as 48%"!!!  i thought the housing crash had sobered everyone up and that banks tightened lending?  also i was disappointed to find out that they didn't have better rates even if i had 30% or 40% down.  (4.625% was her rate on a 30 yr fixed)  SGIP, or any other "loan peeps" out there want to comment on this?  is this normal?  or is b of a making it easier for people to get approved for these new homes (since they probably got a deal with the builder)... would that also mean that they are not selling these loans to freddie and fannie?

48% DTI - pffft - weenie amateurs over at BofA have no stomach for risk!

There are lenders out there - and I can assure you BofA is not one of them - who will lend above a 45% Debt To Income ratio. That person at the Bank may have talked the talk, but our office is full of former BofA LO's who struggled to get 42% DTI deals done over there. 

Some lenders still go over 50% on FHA loans! Think of that one: minimum down, maximum DTI. A 50% DTI is based on gross, not net income. That means real DTI is about 90% considering the taxes, HOA dues, and other expenses living in The OC. Add to this mix a $4.10... wait ... $4.11.... uh... $4.25... OH SCREW IT... gas price climb and that margin of error is getting pretty thin.

On the other side however there are unique cases that should be considered at that high of a debt to income ratio. Of the 100 or so high ratio deals we get, about 2% of them fall into that category.  It's really that low of an occurrence relative to those buyers ready and willing to over extend themselves.

Is this behavior normal? Yes. Lenders have always pushed the boundaries because their customers demand it. Is this behavior an acceptable business practice? Yes, as long as Uncle Sugar keeps the loan guarantees flowing. Is this good for us as a City, County, State, or Nation? I don't think so one bit.

Many of my referring Realtors will call me "conservative" because if a DTI is over 45% I don't give my stamp of assurance the deal will close. In the past some realtors said outright "you're killing my business by not being more open minded about my buyer". That's Okey Dokey with me since I sleep very well at night knowing I'm not the reason someone else is walking the hallway of their new home wondering how they are going to make their monthly nut.

My .02c


Soylent Green Is People.