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Originally Posted by angel83  So, on the backend - what are they really looking for? So many people now have had to use CC's to survive - how much weight does that carry? Negative or Positive? |
If you were apply for new mortgage at this time, the lenders will be looking for a back-end DTI that falls below a certain amount. This varies with the lender - some might only allow a back-end DTI of 40%, some might be at 38%, others might go up as high as 50%.
For the government modification plan, there doesn't seem to be a specific back-end DTI limit, but if your back-end DTI would be above 55% even after a modification, you must agree to HUD counseling as a prerequisite to getting a modification.
The credit card payment that is factored into the DTI is the minimum amount due. So, if you have a credit card balance of $5000 but are only required to pay $50 a month, it is that $50 that is used in the DTI calculation. The higher the CC balance, the higher the minimum payment, so if you've had to run up a lot of CC debt, then it will increase your back-end DTI and potentially push you over the 55% threshold for counseling.