Many Conventional loans are underwritten via Fannie Mae’s automated underwriting engine. This engine will typically not currently “approve” an application (in most cases) if the DTI exceeds 45%, leaving a lot of potential home buyers having to seek alternatives. After extensive research, Fannie Mae is saying there is little to be concerned about in terms of additional risk/default by raising the threshold by 5%.
This is great news for otherwise credit worthy applicants who were “denied” simply for exceeding that 45% mark.
These changes are expected to be incorporated with Fannie Mae’s July 29, 2017 update.