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Ask Our Broker — with Peter G. Miller: Debt-to-income confusion

Question: We have recently tried to qualify for a mortgage. We know that the new rules allow us to devote as much as 43 percent of our income to housing costs and monthly debts. However, the lender says if our monthly debts exceed 41 percent of our income that it will not give us a loan. How is this possible?

Answer: When you go down the highway the speed limit may be 65 but there's no rule that says you can't go slower. The same idea applies to most loans.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, lenders have less liability if they make low-risk "qualified mortgages," financing that must meet certain standards. One of those standards is that the debt-to-income ratio is generally limited to not more than 43 percent of an individual's income. If your household takes in $6,000 a month, then housing expenses, car loans, student debts, credit card payments and the like cannot top $2,580 per month.

But – in most cases – lenders are not required to go to the 43 percent limit. They can pick a lower DTI ratio. Research from the National Association of Realtors shows that nearly half of all lenders will not accept the 43-percent limit. Instead, they use "buffers," meaning they might allow a DTI of not more than 41 percent, 42 percent or whatever.

Why? To make sure they, the lenders, do not accidentally go over the 43-percent limit when selling a loan to investors and thus violate underwriting standards because of undisclosed debt. This is a very real problem: A 2013 Equifax study found that nearly 20 percent of all mortgage borrowers apply for new credit in the midst of a mortgage. "Most borrowers," says the report, "simply don't realize how this new 'undisclosed debt' impacts their ability to qualify for their mortgage."

This is a problem for marginally qualified borrowers. If they go to a lender who uses buffers their ability to borrow will be reduced when compared with lenders who allow the entire 43-percent DTI. For instance, if the household with the $6,000 gross monthly income is only allowed a 41-percent DTI then its monthly ceiling for expenses is $2,460 – $120 less than the 43-percent limit. With less income available for debts, marginally qualified borrowers may not be able to get the mortgage they want, a loan that other lenders who don't buffer might grant.

For details and specifics speak with loan officers about buffering.

Email This email address is being protected from spambots. You need JavaScript enabled to view it. . Due to volume, not all questions may be answered.


Last Updated on Thursday, 24 July 2014 05:43

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Citizens Bank welcomes Wendy Olson as residential loan officer

CONWAY – Citizens Bank welcomes Wendy Olson as a new Senior Loan Officer for the Home Lending Solutions New England Division. With an office located in North Conway, she will support the New Hampshire/Maine region.

Olson has more than 27 years of experience in financial services, serving customers in the New Hampshire, Maine, Massachusetts and Vermont markets with their banking needs. She was most recently a mortgage originator with Residential Mortgage Services, Inc.

"Wendy has a solid understanding of mortgage banking, and we are excited to welcome her to Citizens Bank," said Bruce Ocko, New England Divisional Sales Director. "As we pursue our strategy of providing industry-leading home loan solutions in the New Hampshire market, Wendy's expertise will be extremely valuable in helping us serve our customers."

Olson resides in Conway, and holds a bachelor's degree in business management from the University of New Hampshire. She is an affiliate member of both the White Mountain and Western Maine Board of Realtors.


Last Updated on Thursday, 24 July 2014 05:23

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Fryeburg PD teams with business community on KIDZ TIX Program

FRYEBURG — Fryeburg Police Department has teamed up with the Fryeburg Business Association and developed the KIDZ TIX Program.

KIDZ TIX is a rewards program through which children will be given 'tickets' by the Fryeburg Police officers for choosing safe behaviors or providing services to the community. Collaboration with the Fryeburg Business Association has been a critical part in gathering donations for the KIDZ TIX program and many of the local businesses are participating.

The tickets will provide children with discounted coupons for food, treats, flowers, or other merchandise offered by participating businesses. KIDZ-TIX will be issued for behaviors such as using a crosswalk, wearing a helmet, properly wearing a seatbelt, assisting the elderly, or other outstanding community service deeds.

Officer Timothy Libby issued the first Kidz-Tixs Wednesday on the Mountain Division Trail. Four-year-old Brooke Woodsom, four-year-old Tori Woodsom, and seven-year-old Olivia Woodsom were rewarded with free pizza and cookies from the Jockey Cap Store for properly wearing their helmets when biking with their parents.

"My officers are excited to participate in this program and view KIDZ TIX as a great opportunity to reward children for acts of kindness and exhibiting safe behaviors," acting Chief of Police Joshua Potvin said.

"In many cases, with the absence of a School Resource/Dare Officer in our school system, the children in our community only interact with our officers when something bad has happened to themselves or a family member," he continued. "My hope is that the KIDZ TIX program will change that and provide our youth with a positive interaction with the officers."

Potvin shared a safety story.

"Back in June," he said, "I was welcoming residents and guests at the opening of Bradley Park. Prior to the event starting I was approached by two small children who asked why I was there with a concerned and puzzled look on their faces. It was that moment that I realized that we are not having enough positive interaction with the children of our community. The Fryeburg Business Association has played a critical role in supporting the program. ...We are extremely fortunate to have received donations from our businesses for KIDX TIX. I am grateful for the overwhelming community support for this project."


Last Updated on Thursday, 24 July 2014 05:15

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James MacMillan named manager of local TD Bank offices

CONWAY — TD Bank has promoted James A. MacMillan to assistant vice president, store manager for TD Bank offices at 2561 Main Street in North Conway and 769 Route 16 in Glen. He is responsible for new business development, consumer and business lending, managing personnel and overseeing the day-to-day operations at the bank branches serving customers throughout the Mount Washington Valley area.

Last Updated on Tuesday, 15 July 2014 03:59

Hits: 395


Chamber seeks sponsors for annual meeting

CONWAY — The Mount Washington Valley Chamber of Commerce has set a date for its 102nd annual meeting, being held Oct. 28, 2014 at the Attitash Grand Summit.

Last Updated on Monday, 14 July 2014 23:53

Hits: 233



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