Ideal Percentages

[jennifergirl]

I was wondering what the ideal ratios are for being considered for a loan modification.

What percent of your NET (after tax) income can/should be your mortgage in order to qualify? I have heard that if the ratio is too high, they will deny you. Does this number include property taxes, insurance and any equity lines? Or, are those considered separately?

What percentage of your income can/should be promised to other credit expenses such as credit cards, car payment, etc?

What percentage of your income can/should be for living expenses?

I have heard if things are too high, the modification gets denied. Also, if it is too low. Anyone know of the sweet spots?

Thank you for all of your input!

[Moe Bedard]

Hey jennifergirl and welcome to LoanSafe!

was wondering what the ideal ratios are for being considered for a loan modification.

What percent of your NET (after tax) income can/should be your mortgage in order to qualify? I have heard that if the ratio is too high, they will deny you. Does this number include property taxes, insurance and any equity lines? Or, are those considered separately?

This is all debt like you mortgage, credit cards, insurance etc. This is debt.

What percentage of your income can/should be promised to other credit expenses such as credit cards, car payment, etc?

With your mortgage, you need to be at 33%-40% and 45% in some cases will be accepted by mortgage servicers.

What percentage of your income can/should be for living expenses?

55-67%

I have heard if things are too high, the modification gets denied. Also, if it is too low. Anyone know of the sweet spots?

Yup. You need to be as mentioned above. 33-40% is ideal.

[jennifergirl]

Hi. OK. I am still a little confused.

Lets say mortgage + int + taxes are $5000 /month

Equity line is around $700 /month

Let's say living expenses are around $5000 /month

What range of NET income would I need to make in order to be in the safe zone to possibly qualify?

I think approaching it this way would help me to understand a bit better.

Thank you for all your help!

[davephx]

Is your mortgage owned by FANNIE MAE (I understand about 70% of all First's are)
Find out by your property address at Does Fannie Mae Own Your Mortgage? Loan Lookup Tool

Per Fannie Mae servicer guidelines.

Take your Gross monthly income x 31%. That is the target for your modified first if you otherwise qualify. Depending on who owns 2nd if the first is modified the 2nd may be either extinguished or goes to 1% if amortized or 2% if interest only. This is called the 2HP program which Moe has also posted info on.

Your other debts, 2nd and expenses if over 55% of gross income, only means you have to agree to have credit counseling.

[jennifergirl]

Originally Posted by Moe Bedard

With your mortgage, you need to be at 33%-40% and 45% in some cases will be accepted by mortgage servicers.
55-67%

Hi. OK. I am still a little confused.

Lets say mortgage + int + taxes are $5000 /month

Equity line is around $700 /month

Let's say living expenses are around $5000 /month

What range of NET income would I need to make in order to be in the safe zone to possibly qualify?

I think approaching it this way would help me to understand a bit better.

Thank you for all your help!

[jennifergirl]

Living expenses include everything from car expenses to childcare to food to credit cards in this scenario.

[alex098]

I am a newbe to this forum and in the process of getting the first paperwork together. I am also very confused by the financials. They say new payment is going to be 31% of the gross. So why do they want all the other debt and living expenses? Just get the gross income, figure out how much is 31% and this is it For PITA. So, how do expenses affect the payment? Another reason I am askinfg is that I need to buy a car and debating wheather to buy it on credit (and increase my expenses) or buy a cheap clunker for cash just to avoid this expense. I am in a tight spot - no cash, but more credit is scary... Can anybody advise?

[davephx]

Under HAMP directives the other debt is only used for what is called "back end DTI" If its over 55% you have to agree to credit counseling it has nothing to do with qualifying.

Living expenses seems to be important for in house mods (not HEMP) in that they want to see at least a small surplus to afford ongoing payment.

[mcdrj68]

I was contacted by my servicing company (homeq) to see if i would qualify under their plan (hamp) I wrote an in depth letter ofhardship. gave my expenses; gave copies and copies of paystubs. a month later they wanted me to get a letter from my husbands employer stating how his OT is going to be going down and more paystubs from me. I am now sitting in LIMBO. Would they make you wait this long to let you know if you quailify. I show now a surplus because i turned in a lease and reduced my insurance. i hate this waiting game. They had me on a repayment plan but i couldn't really afford it but i did it to make them leave me alone with all the phone calls.

[ABC123]

Under HAMP directives the other debt is only used for what is called "back end DTI" If its over 55% you have to agree to credit counseling it has nothing to do with qualifying.


What if I have no credit cards???? I used that Homeowners Toolbox site and it says my back end DTI is 73%. I have no idea what that means! I have no credit card debt AT ALL! The only expenses I have are utilities and my car payment.

I am so confused.

[davephx]

Car payment is included if a loan - vs lease - if that might be part of it.