Flexibility is allowed, but should be 29% front, 41% back.
Standard qualifying ratios are Total House Payment (PITI) to Income of 29% (front) and Total Debt Ratio including House Payment of 41% (back). It is possible to exceed these ratios with compensating factors. As far as USDA Rural Development is concerned, there is no maximum amount. The ratios may be exceeded; however, common sense and investor overlays will come into play. Depending on the strength of the compensating factors, front ratios in the mid to high 30s and back (total debt) ratios in the mid to high 40s are not uncommon.
Note: Standard ratios can be exceeded by up to 2% on energy-efficient NEW and EXISTING homes meeting requirements of the 2006 International Energy Conservation Code.
Under the special program called “Rural Energy Plus,” the qualifying ratios used to determine an applicant’s ability to repay a home loan may be exceeded by up to two percentage points if an energy-efficient home is purchased. This applies to both new and existing homes.
All new homes that are built to meet the 2006 International Energy Conservation Code (IECC) or a subsequent comparable code are considered energy efficient and eligible for the two percentage point increase in the qualifying ratios. Existing homes that meet the same standard, or are being retrofitted to meet it, are also eligible.
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