This topic contains information on determining the borrower’s monthly PITIA used for qualifying purposes, including:
The calculation of the qualifying payment amount for the subject property will differ based on the transaction type (as shown in the following table).
These policies apply to both manually underwritten loans and DU loan casefiles. In all cases, qualification must consider the borrower's current obligations and other mortgage-related obligations, i.e. PITIA.
Mortgage loans subject to temporary interest rate buydowns must be qualified without consideration of the bought-down rate, based on the transaction type below.
|Qualifying Interest Rate Requirements|
|Transaction Type||DU and Manual Underwriting|
|Fixed-rate mortgages||Note rate|
|ARMs with an initial fixed-rate period of five years or less||Greater of the note rate plus 2% or the fully indexed rate|
|ARMs with an initial fixed-rate period of greater than five years||Greater of the note rate or the fully indexed rate|
For DU loan casefiles, the fully indexed rate is defined as the index plus the margin as entered in the online loan application. The index and margin are required for all ARM loans submitted to DU.
If “Lender ARM Plan” is used in DU, DU uses the interest rate entered in the ARM Qualifying Rate field. If no interest rate is entered in that field, DU uses the note rate plus 2% to qualify the borrower.
For additional temporary interest rate buydown requirements, see B2-1.4-04, Temporary Interest Rate Buydowns.