Quick question: for W-2 borrowers at 46–47% back-end DTI, 720 FICO, 90% LTV, but 12 months of liquid reserves, are you treating the reserves as a sufficient compensating factor to clear conditions, or are you still hitting a hard stop at the overlay? I’m seeing DU Approve/Eligible while an investor overlay caps DTI at 45%, and I’m weighing exceptions when job stability is 5+ years and payment shock is under 10%.
If it’s truly a ‘hard stop at 45%’, reserves are your seatbelt but the speed limit still wins — either submit an exception with a one-pager (12 mos reserves + 5-yr tenure + clean housing) or price it under 45 with single-premium MI or a small rate buydown… Otherwise, place it with an investor that honors DU to 50% DTI; want me to DM a couple that are taking these with strong reserves?
With ‘DU Approve/Eligible’ at 46–47% and 12 months reserves, I’d stop wrestling the 45 overlay and either price a small buydown to 44.9% or place it with an investor that honors DU to 50%. Could you use a seller credit to cover the points? Otherwise, run LP too — some shops will take Freddie on this profile and you keep the 90% LTV clean.
, the 45 cap drives me nuts — try flipping it to LPA and rerun, @OP; I’ve had 46–47% with 720/90% and “12 months reserves” clear there when the investor’s DU cap wouldn’t. If LPA still balks, a tiny targeted debt payoff to drop 0.3–0.6 DTI has been cheaper than a rate buydown in my files. Want me to share the quick payoff-to-DTI calc I use?
Check the MI angle — some carriers still hard-cap DTI at 45, so even with DU “Approve/Eligible” and a year of reserves, the real bouncer might be MI; try repricing with a different MI provider or LPMI, @lcarter72. If MI isn’t the blocker, paying off a small installment to shave the back-end a notch is usually faster than chasing an exception.
@OP, if that 45% cap won’t budge, knock out a small tradeline and run a rapid rescore — shaving even $25–$35 from monthly debt can push you to 44.9% and clear the overlay… Got a tiny card or installment you can zero out? Funny how a $25 store card can play bouncer.
I’ve gotten similar files cleared by switching to single‑premium MI (use a seller credit or go LPMI) so there’s no monthly MI, which drops the payment enough to slip under the overlay; @OP would that price out for you?