FHA loan tip of the day…

FHA loan tip of the day…

houseDid you know that FHA allows the lender to deduct the monthly alimony payment from your clents gross monthly income when calculating there debt ratios?

 

Because of the tax consequences of alimony payments, FHA guidelines permit the lender to deduct the monthly alimony payment from the borrower’s gross monthly income before calculating ratios, rather than including the alimony payment with other monthly liabilities.

 

This can make a huge difference in qualifying ratios.  With the higher loan limits available in many areas today, borrowers who owe monthly alimony payments, who will not qualify for a Conventional loan, may now be switched to an FHA loan.

EXAMPLE:

A borrower is making $5,000 in gross monthly income.  The total PITI mortgage payment, combined with consumer debts, plus $800 in monthly alimony, totals $2,300.

 

$2,300 total debt / $5,000 gross monthly income =  46% DTI

 

If the borrower switches to an FHA loan, here is how it will be handled:

 

$5,000 gross monthly income minus $800 alimony payment = $4,200 net income

$2,300 total monthly debts minus $800 alimony payment = $1,500 mo. debts

 

$1,500 mo. debts / $4,200 net income =  35.71% DTI

 

THE DTI WA REDUCED 10% BY USING THE FHA FORMULA FOR BORROWERS WITH MONTHLY ALIMONY PAYMENTS!!! This is a great option to help get your clients a home sooner than later.

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