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Can a USDA Debt Ratio Waiver increase your sales price limit?

July 15th, 2016 by Sean Stephens

How does a USDA Debt Ratio Waiver increase your qualifying ability?

What can a homebuyer do if they want to increase their budget and sales price? USDA loans can offer a solution for this type of situation through a USDA Debt Ratio Waiver.

Today’s video tip will walk you through the steps and show you yet another way that USDA loans offer qualifying flexibility.

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What is a USDA Debt Ratio Waiver?

Just to clarify, please note that debt ratio waivers are NOT required on loan files that receive a GUS Accept. Today’s topic will cover any loan files that receive either a GUS Refer, Refer with Caution, or have to be manually downgraded by underwriting.

As a quick review, USDA published guidelines for debt ratios are 29% for a monthly housing expense and 41% for total expenses of your gross monthly qualifying monthly income.

For expanded qualifying ability, a USDA debt ratio waiver can be approved if ALL of the following conditions are met:

  1. Principle & Interest, Taxes, Insurance (PITI Payment) is between 29% and 32% (This would be considered your housing expense and would also include any association fees if applicable.)
  2. Total ratio is between 41% and 44%
  3. Credit score of all applicant(s) is 680 or greater, and….
  4. At least one of the following compensating factors is identified…..

Compensating Factors

  1. Proposed PITI payment is equal to or less than the applicant’s current verified housing expense for the past 12 months preceding loan application
  2. Verified liquid assets available after closing with at least 3 months of PITI payments. Examples of verified assets could be shown through 2 months of bank statements, 401K statement, or other asset account, but NOT cash on hand.
  3. All employed applicants have been continuously employed with their current primary employer for a minimum of 2 years as documented by. This is NOT applicable for self employed persons.

A USDA debt ratio waiver request must be submitted to Rural Development, in writing, with the compensating factors listed to support the request.

USDA loans are in the blood of my entire team! As an approved USDA lender, we are experienced in the USDA process and are here to help guide you from pre-qualification to closing.

We are ready to help with your next pre-qualification or if you are in need of an expert 2nd opinion.

Just call or email to discuss your scenario and let us show you the Metroplex difference!

Thank you for the continued referrals and trusting us with all of your mortgage needs.

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