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Debt to Income ratio for loan modification

Discussion in 'Loan Modification' started by Billd, Nov 5, 2008.

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  1. Billd

    Billd LoanSafe Member

    I am in the initial phase of applying for a loan modification with Saxon Mortgage. As i know this may be a one shot deal. I am
    trying to determine what the debt to income ratio that most
    lenders will require for qualification. Saxon won't tell me, there
    response was "it varies". Does anyone have a good ballbark figure? How much expendable income to they like to see after
    all expenses? I am already 90 day late so i'm in a bit of a time crunch.

  2. Moe

    Moe Call 1-800-779-4547 Staff Member Loan Safe Mortgage

    Actually they are correct............it varies from investor to investor and we just don't have that information even to give you a ballpark. You should be able to go over the financials with Saxon, most servicers have been helping members with that.
    What you would need to do is to approach it differently and try to ask questions like, if you should do your income off of gross or net and do they calculate a certain amount of credit card debt or can you count all of it...........and keep calling until you get the person that is willing to help......
  3. MUCHO

    MUCHO LoanSafe Member

    This is great advice. Here is some other things I have learned.

    Assume that if you get a loan modification it will not include principle reduction.

    If you make too much money they won't help.

    If you make too little they won't help.

  4. FacingNorth

    FacingNorth LoanSafe Member

    Can you give an approximate broad range of the ratios for making too much/too little? I'm in the process of weighing my options between applying for a short re-fi at current market value, holding out to see what the terms are for the new expanded Chase modifications, and walking away.
  5. MUCHO

    MUCHO LoanSafe Member

    Sorry I have no idea. Also it depends on the state you're in because forclosure laws vary. If you're not late I doubt they would consider a short refi. Once you're late you can't qualify for a short refi unless you can qualify for the HOPE program in which case credit doesn't play as much of a role.

    Maybe someone will give you better advice. I am not optimistic.

    Here is what I do know. They will consider all factors and weigh them in order to decide what works best for them. How will they lose the least. So if you don't make enough money to make a mortgage payment under a modified loan they won't modify. If you make too much money they don't want to talk to you until you have ruined your credit and shown a willingness to walk away.

    Consider that the vast majority of modifications are going to be rate modifications and not priciniple reductions.

    JOETRU LoanSafe Member

    Try to keep a 20% surplus of your net pay after all your debt is accounted for.
  7. Meechie150

    Meechie150 LoanSafe Member

    I'm no expert but I was told by another lender that they were looking for at least 500.00 left after all expenses were paid and that's including groceries, cell phone, etc.....I hope this helps...but I know for sure you can not be in the negative....They want to see if you can afford your home even after modification is complete and all your other expenses are paid....
  8. MaryJune123

    MaryJune123 LoanSafe Member

    From what everyone is saying is that your net income must be in excess of your debts and someone said by $500 and someone else said by 20%. I am a little confused because if we had this "surplus" we would not be needing a modification. I must be missing something to the formula. What is everyone using as the "mortgage debt" ? A proposed reduced mortgage payment or the pre-modified mortgage payment? If I use the pre-modified mortgage payment I don't come up with a 20% surplus or a a $500 surplus. What am I missing?
  9. ~Jess~

    ~Jess~ LoanSafe Member

    If we had a 20% surplus, we wouldn't need a mod, lmao. That would be an extra $1000 a month. We showed a negative of around $400 pre-mod, after mod will be a surplus of around $200. We were recently approved for the trial period for the obama plan thru gmac.
  10. rlhoneydew

    rlhoneydew LoanSafe Member

    We just made our final (3rd) trial payment with Saxon on 8/1.

    According to them (as of yesterday) we are approved for the HAMP Mod. and our final paperwork is in underwriting. The rep. told me only one HAMP Mod. has been finalized & to be patient....

    Our net after expenses was $540.00. Not sure if this is the "magic" number, but it looks like it worked for us.

    Hope this is helpful info..... GOOD LUCK :).
  11. SillyWorld

    SillyWorld LoanSafe Member

    I could make it to that number if I skip Credit card and loan payment:cool:
  12. faith

    faith LoanSafe Member

    <O:p</O:pLenders modify if you are::

    Behind on Mortgage Payments

    In Foreclosure (Nod or Lis Pendens

    Has an ARM That Has Adjusted Higher orWill Adjust Higher Within The Next Month or MAXIMUM Two Months

    Has a legitimate hardship

    Reduced income

    Pay cut at work

    Reduced hours

    New job (less pay)

    Loss job

    On disabilityworker's comp


    Excessive medical bills

    Back taxes that are currently going paid back to IRS

    Death of Household Provider

    Failed Business

    The client must demonstrate the inability to meet current financial obligations in order to qualify for Loan Modification. Simply wanting a modification does not qualify a homeowner. They must show NEED.

    <O:p</O:pWhat is difficult or impossible to modify?
    Client's sole hardship is "TOO MUCH DEBT"

    Client shows a lot of assets (401K, savings accounts, stocks, bonds, retirement accounts, IRA's)

    Client shows a low debt-to-income ratio (Too much income vs. expenses).

    Multiple properties

    Fixed rate mortgages that are current (depending on the lender)

    Client does not have a true hardship

    Client's sole hardship is "MORTGAGE IS MORE THAN PROPERTY IS WORTH"

    More money being deposited into personal checking account than what they claim as income

    Has had a modification done in the past year

    Has a history of missed payments beyond current situation

    Has not had the loan for at least one year

    - Negative amortization loans,

    Source: Home Affordable Mortgage Program<O:p
  13. Lhuynh

    Lhuynh LoanSafe Member

    I believe you need to know your
    1st mortgage: Principal balance, interest rate, mortgage payments, is it an impound account, interest only?, the current home value, monthly property tax, monthly insurance, monthly association dues

    if you have a 2nd mortgage or not?

    Monthly income: pay frequency gross per period, monthly gross, net per period, monthly net, 2nd job net, rental income, child support, any other sources?

    Monthly expenses: credit card payments, auto loan payments, other obligations, utilities, food and household.
  14. mom2many

    mom2many LoanSafe Member

    They are asking for all "income" from any source. HOWEVER, if you get an adoption subsidy for a special needs child, can they require you to claim it is income, even though it is expressly meant NOT to be considered income for tax purposes? AND depending upon the age of the child, it will certainly not be something you could rely upon year after year, it ends when the child stops being a minor. They cannot require child support to be declared as "income" so can they require tax exempt subsidies earmarked towards the expenses related to the child, just like child support is?
  15. MAXIE19

    MAXIE19 LoanSafe Member

    I think there is a difference between funds available to you that are not taxable i.e. adoption subsidies and other taxable income. If it helps you qualify for the loan, there is no harm in claiming same. Be sure to specify the type of income and source. Uncle Sam will not come calling if it is tax exempt funds.
  16. MAXIE19

    MAXIE19 LoanSafe Member

    With regards to when the adoption subsidy funds run out, depending on the particulars of the child's special needs and how profound it is, there are some jurisdictions that will allow the subsidy payments to continue beyond age 18 to possibly 21. Even after 21, some other type of governmental assistance can still be accessed. It will certainly help your loan modification if you can show that the funds will be forthcoming for an extended period of time.
  17. litton nightmares

    litton nightmares LoanSafe Member

    In terms of the adoption subsidy, I learned they are treated just like "separate maintenance payments" such as alimony or child support IF you WANT/ NEED to rely upon it FOR making a mortgage payment (WHICH BY DEFINITION, YOU ARE NOT SUPPOSED TO DO, hello, they state that you must be able to cover your own costs of living in most jurisdictions) then you COULD disclose it as a resource used to pay bills for your household and you must show it is regularly there AND that you anticipate it will continue for the foreseeable future.
    AND now THERE is the problem, in MOST places, it is subject to a renegotiation EACH YEAR and so it could be reduced, in fact, usually will be significantly reduced once a child attains the age or 18/ graduates from high school, depends on where you live.

    It is true that some subsidies continue until a person reaches their young adulthood, IF they remain in the home, past high school, or if still in high school, as a lot of special needs student do take a longer period of time to graduate from high school. SO, this isn't really, in many cases, something that you can say will remain the same.

    That is why it is usually left up to you to say YES, I NEED TO UTILIZE THIS SOURCE FOR INCOME IN ORDER TO PAY THE MORTGAGE, at this time.

    But, it is risky because it technically is NOT supposed to be used as a means of supporting your own basic costs of living, even though it IS supposed to be used to provide for the "needs" of the child-- which OF COURSE INCLUDE THEIR NEED FOR YOU TO HAVE A HOME TO RAISE THEM IN, doh.

    This whole "permanency" thing really is a double edged sword for families who are adopting older children, or those with special needs, or sibling groups, which are usually the children that are eligible for subsidized adoptions.

    The issue is this, often these children were actually living with the family in the first place, either unofficially, or through a kinship care arrangement, much like foster care. THEN, there is a financial incentive from the Federal Gov, to find PERMANENCY through adoption.

    NOW DO NOT GET ME WRONG, I think it is the absolute BIRTHRIGHT of every child, to have a forever home, with a family that adores that child and will be there for them through whatever trials and tribulations they have growing up. ALL children need that home base to do well in their childhood years and beyond and I am ALL for "permanency" and stability for every child.

    HOWEVER, what is going on in reality is some people are taking on FAR more than they ever are made to realize, for example, if a child suffers with some extraordinary conditions, requiring RESIDENTIAL CARE, as an adoptive parent there is only SO MUCH HELP, whereas, if the child were with you through a kinship care, the state would still be responsible to fully subsidize whatever level of care they might require. Also, if your household previously qualified for federal programs, such as fuel assistance, adoption with subsidy can REDUCE your eligibility and sometimes even make you ineligible for ANY fuel assistance, food stamps, etc...-- because if that subsidy, along with the added person in your household brings up the household "income" disproportionately to what it was without the added person or the added "income" which adoption subsidies ARE counted as income in most places for the purposes of Federal programs, like FINANCIAL AID, fuel assistance and SNAP, then.... guess what, you may have just about lost any actual benefits gained for your household.

    People need to really explore, if they are in any position to do a subsidized adoption, because only the positive parts get discussed, nobody relates the effects of adoption subsidies with regard to the federal assistance programs, the family, as it exists might be qualified for some federal benefits, BEFORE an adoption subsidy, but subsequently may NOT be.

    And sorry, but THAT is not a favor to anyone, since typically you'd have to be low income in the first place to be eligible for the help and it is WRONG for the Federal Government to act like it is all about PERMANENCY for CHILDREN, when it also seems to be about, GETTING BENEFITS GIVEN AT THE FRONT DOOR, SLASHED AT THE BACK DOOR, of the same household.

    Basically, if you are, DUE to a subsidy, denied any part of benefits you OTHERWISE got, you are essentially SUBSIDIZING, that portion of the subsidy.
    Adoption subsidies should NOT get treated as income, UNLESS, that is the only way to establish enough income to show for a modification, you maybe did NOT need before, but do need now. Afterall, there are only a very few things that ARE more critical than being able to keep a roof over your collective household member's heads.
    If the child is still young, the rate will USUALLY remain in place until they get older.

    With state budgets in crisis all over the place, we can easily imagine, it would be tempting though to start cutting back the money paid to families who have adopted special needs children, after all, it is clearly stated, that it goes year, by year. And I know people who have gotten notified of very significant reductions, once the child entered into high school, and in another case, after they graduated from high school; despite their continuing to need a lot of assistance and support in their day to day life.
    I also get tired of people acting as if the adoptions subsidies, kinship payments, or foster care stipends, cheapen the relationship or the family receiving the payments. If someone were to win the lottery, I'd bet they'd not then NEED or WANT the help.

    So, maybe there are some for whom it is all about "the money" -- but please, bear in mind the person caring for the child, did NOT bring the child into the world and was certainly NOT the cause for their hardships, just the opposite. AND how many of you could just suddenly ADD more dependent household members who have ZERO income, without then getting any form of assistance to aid in the COSTS of bringing them into your home-- which might even mean cutting back your hours at work, or adding a ramp, or paying for someone to be there with them, anytime you can't be.

    Not to mention the extras like paying for a class ring, school photos, the field trips, the team sports, the health club memberships-- maybe SOME could afford it, but for all of those who could comfortably do so, they don't seem to be volunteering in sufficient numbers to meet the need. Actually, some of the people I've known who got adoption subsidies, were fairly well off, but would NOT have adopted without the subsidy, because of the child's needs. The tragic situation of the family who adopted all the children with special needs in Florida, being an example, even though they had a lot of their own resources, they could only do what they did, with the additional subsidies.
    So please, don't make harsh judgments about people who have made room in their FAMILY for more people who definitely needed a family to be in, when their own family of origin either : wouldn't or as is also the case, sometimes COULDN'T be there.

    I am getting off on a tangent, I know, but it is important. Do you know how you hear about children getting shuffled from "home to home" in foster care? WELL, sometimes that happened PRIOR to the child EVER coming into the system. Sometimes the parents were feeling the effects of this economy and were evicted from several places, due to job losses and rent increases.
    And sometimes the parents really have too many problems and issues to manage the needs of their own children. Sometimes the bio family members are the ones, who have tried to take in the child, and bounced them from an aunt to a grandfather, to an uncle, and so on before the child is either found in need of services by the state, OR relinquished voluntarily as this economy sees happening more and more.
    I feel like there really is no ONE SIZE FITS ALL POLICY that is working. Each child and situation is unique and presents unique challenges and joys. Just as for one it is a major accomplishment to learn a simple skill by the age of even 16, and for another they can graduate from college at that age. It is also the case that most children DO want to remain with a member of their own family, if their parents can't care for them, but a lot of times, the other members of that same family have similar issues and trouble, OR they just are NOT economically equipped. If you are an older person living in a one bedroom apartment, on a fixed income, you may truly WANT to take in your three grandchildren BUT you would need a LOT of help to be able to manage that, unexpectedly, needing to happen. So, please, resist the idea that people who get help taking care of children, are just "in it for the money"-- fact is, as this post shows, many simply can't do it WITHOUT the money TO DO IT.

    And I am a former foster child, my foster parents began doing foster care because their oldest child was going off to college and they absolutely needed more income to help pay for that, BUT needed that source of added income NOT to hurt them in terms of financial aid the following year and someone felt they'd be great foster parents, and they were, they moved two of their own children into a room, to provide me with my own room. And I lived with them for several years, until things were more viable with my mom, by then I was old enough to be on my own, 17.
    I know I would NOT have wanted to be adopted, and the idea of it being "permanent" would probably have resulted in my running away, at the earliest opportunity. I've seen stable situations were children have done well for several years, suddenly go very bad, because of that "A" word.
    I'm sure there are also many children who DO want to be adopted, but they are the children who have really given it thought and have come to accept in a mature sort of way, that their family of origin isn't a viable option. Many children, even if true, will NEVER accept that idea, and adoption isn't a cure all for them. They are, as I was, far more comfortable with the thought of being in a "temporary" place, even if it DOES end up being for quite a while.
    The other reason for foster children moving, has to do with attachment, on the one hand, attachment is encouraged to take place, however, that is supposed to be one way in foster care, they want the child to attach, they want the foster parents to be supportive, caring and ready to let go, as soon as a service plan changes. Hard to manage, for most. This board is fantastic, but you'd be amazed at some of the stuff that gets said about adoption subsidies/foster care on other boards. And there is TONS of DYSINFORMATION too, like this one guy who posts about how no matter what a very large study proves children are better off remaining with neglectful parents than being torn out of their families and put into what he calls the foster care industry. He fails to mention the study considered ALL situations as if "foster care" for the purpose of the study, so those children in psychiatric residentials, were counted as being in "foster care" as were all juvenile offenders living in locked facilities, and having called these populations "foster care" the study then concluded that all children were better off remaining with their birth parents. Tell that to ones we have lost when the wrong call gets made because, nobody wants to break up anyone's family and it really is done as a last resort after other things have been tried, and failed.
  18. gmorgan

    gmorgan LoanSafe Member

    Debt versus Payments

    A lot of posts here confuse debt with payments.

    Debt is how much you owe - ie. you owe $5,000 on a credit card.

    Payment is how much it costs to service the debt in a month.
    ------------ ie. your payment on $5,000 in debt is $75 per month.

    In my financial worksheet, I am looking to have the payment
    on my mortgage reduced by $1,000.

    Therefore, If my current monthly income is $3,000, I would
    list monthly payments totaling $4,000 so the modifier would
    look to bring my deficit down to zero with a $1,000 reduction
    in my monthly mortgage payment.

    If your monthly income was in excess of your debts, you could
    just pay off all your debts next month and you would be done
    and have no more payments ever.
  19. Jess -- When you showed a negative of $400 pre mod, was that using gross or net income?

    After mod, you showed a surplus of $200. What that using gross or net income?

    CONGRATULATIONS ON YOUR PREAPPROVAL! I wish the best for you!!!!!
  20. ~Jess~

    ~Jess~ LoanSafe Member

    Had to get out my initial paperwork to double check, it's been a LONG time since I filled it out (Mar 09), both of those figures were based on my net--my actual cash flow. However, my trial payment (and permanent mod payment) was based on gross income. Our HAMP mod was just made permanent last week!
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