Compensating Factors: facts and myths

Consumers are becoming more and more educated these days. Some clients even quote me guidelines. I blame myself. After all I’m the one posting these online. Believe it or not, I love educated clients. It makes my job easier. It also means their reading my posts! But for those of you savvy borrowers out there, here’s a list of compensating factors for FHA borrowers whose debt-to-income ratios exceed benchmark recommendations. The borrower has successfully demonstrated the ability to pay housing expenses great than or equal to the proposed monthly housing expenses for the new mortgage over the past 12-24 months. …

What are Compensating Factors When Qualifying for a Mortgage?

Although we wouldn’t know it from watching the six o’clock news, mortgage underwriting guidelines and mortgage insurance underwriting guidelines have been in a pattern of loosening, not tightening.  This trend started in late 2009 and continues today with such examples as lower minimum credit scores for mortgage underwriting guidelines and fewer declining markets for mortgage insurance guidelines.  As this has happened, another trend has emerged.  The phrase “underwriting exception” is coming back in practical contexts rather than a nostalgic reference to days gone by.  These days, underwriting exceptions are more and more common where a mortgage loan file has “Compensating …