New tool factors bankruptcy, FICO score and debt ratio into the equation
The new tool won't underwrite you
The new tool is not a complete substitute for having your loan application underwritten by a lender. The major differences are:
1. The new tool uses the income you enter but does not ask you to document it. A lender will ask you to document income, as well as the assets needed for the down payment.
2. The new tool uses the credit score you enter, but the lender will use a score obtained from another source, which may be different. The difference is likely to be small but even a small difference can matter if the score you enter places you close to the rejection line.
3. As noted, underwriters have discretion to adjust maximum payment-to-income ratios to other features of the transaction.
The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.
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