Wednesday, July 9, 2008

FHA Debt Ratio

I received the following question from a mortgage company yesterday. I'm sure many of you may have, or will encounter the same issue someday. I hope this helps.


To Whom It May Concern,

I've got a guy that I'm trying to get approved thru FHA, but I'm having an issue with his debt ratio since the underwriter is telling me that we have to count a child support payment against his ratios even though we've documented that the child turns 18 in less than 10 months and he'll no longer have to pay that obligation at that time.

Since it's less than 10 months my argument is that it shouldn't count against him. If I were trying to do a loan for the lady receiving the child support she wouldn't be allowed to use that as income since it won't continue for 3 years. The underwriter is
saying that the government counts this as a debt regardless of the amount of time left, which doesn't seem right to me.

According to the Child Support section in the credit guidelines on your website it looks like I'm correct. Can you please give me some clarification on who is right here and if it's me if you could provide some type of documentation that I could show the underwriter I would greatly appreciate it.

Thanks for your help.




Pete, You are right to a point. Below is a link to the 4155 and an exert. Note the red...

Good Luck

http://portal.hud.gov/fha/reference/4155-1.doc page II-51

SECTION 4: LIABILITIES

2-11 TYPES OF LIABILITIES. The following are types of liabilities that must be considered in qualifying borrowers:

A. Recurring Obligations. The borrower's liabilities include all installment loans, revolving charge accounts, real estate loans, alimony, child support, and all other continuing obligations. In computing the debt-to-income ratios, the lender must include the monthly housing expense and all other additional recurring charges extending ten months or more, including payments on installment accounts, child support or separate maintenance payments, revolving accounts and alimony, etc. Debts lasting less than ten months must be counted if the amount of the debt affects the borrower's ability to make the mortgage payment during the months immediately after loan closing; this is especially true if the borrower will have limited or no cash assets after loan closing.


Always,

Connie

1 comment:

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