New DTI Requirements

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April 10, 2020

New DTI Requirements

There was a new article posted by CalHFA about their DTI ratio requirement changes on April 16, 2020. Starting May 1, 2020 CalHFA’s DTI ratio requirements will change. The maximum debt-to-income ratio for all eligible borrowers cannot exceed 43.00% from the previous 45.00%.

(https://www.calhfa.ca.gov/homeownership/bulletins/2020/2020-06.pdf)

What does this mean for you? Well, your DTI tells your lender a lot about you. Mainly showing how much debt you fall into when compared to how much income you are making. Having a lower DTI percentage means that you are allowed less debt per amount of income. The higher your DTI, the higher risk factor you have for your lender. It’s always best practice to maintain as low of a DTI ratio as possible.

Example:

If you make $6,000/month and want to fall under the maximum DTI of 45%:
$6,000 x 45% = $2700.
At 45% DTI, you are allowed to have a mortgage payment that is up to $2700/month max.

Now here’s the example if you made the same amount, but had a maximum DTI of 43%:
$6,000 x 43% = $2,580.
At 43% DTI, you are allowed to have a mortgage payment that is up to $2,580/month max.

The difference of 2% in this situation is $120. It might not seem like much, but sometimes it could be enough to cause you to not be able to get your dream home.

If you’re interested in some workbooks and my DTI Cheat Sheet, please download my Ultimate Mortgage Guide, where I have all of my examples, cheat sheets and walkthroughs on how to calculate your DTI.

Do you want to know more about DTI? Check out my livestream about DTI here:

Minh Nguyen

Minh Nguyen

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