DTI- How to troubleshoot issues with DTI
Overview
The purpose of this help guide is to provide a streamlined checklist for troubleshooting DTI issues. For additional training material with more detail, please refer to the How to Set Up the 1003 help guide.
Scenario A: Front ratio is blank or incorrect
The front-end ratio is calculated by dividing present housing by total income.
Checklist
1. Confirm that present housing expenses and total income are accurately filled out.
a. These totals can most easily be referenced on the Transmittal Summary:
i. Formula: present housing/total income * 100
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Scenario B: Back ratio is incorrect
The back-end ratio is calculated by dividing total expenses by total income. These totals can most easily be referenced on the Transmittal Summary:
Total expenses include primary housing expenses:
1. For a primary residence (purchase or refi) Encompass will automatically use the proposed primary housing expenses in this total.
2. For non-primary residences (second home or investment) Encompass will include the present primary housing expenses and the proposed housing expenses for the subject property.
Checklist
1. ☐Confirm the following items are accurately completed on the Borrower Summary:
a. Loan purpose
b. Occupancy
c. Loan type
d. Subject property rental income
2. ☐Repeat step #2 for any additional 1003’s on the loan
a. If there is a non-occupying co-mortgagor, the occupancy status should match the occupancy of the primary borrower.
3. ☐Go to the Transmittal Summary and manually calculate the DTI using the total income and total expenses fields:
a. Formula: total expenses/total income * 100
b. This manual calculation serves as a point of reference for troubleshooting AUS DTI discrepancies.
c. Note: make sure no fields are locked (all lock icons should be blue)
4. ☐Go to the URLA Part 2 and review all income entered
a. Base salary is straight forward and has minimal complications
b. Take care to review additional income types
5. ☐Go to the Verification of Liabilities and review all entries in the VOL
a. All mortgages must be attached to a property in the VOM
6. ☐Go to the Verification of Mortgage and review all entries in the VOM
a. All properties must have a lien attached, unless the property is owned free and clear
b. VOM data entry review, everything highlighted in red affects the DTI calculation:
7. ☐Go to the URLA Part 4 and review the response for the Declarations question on occupancy. This must match the occupancy status designated on the Borrower Summary.
a. Note: If the URLA has joint applicants, the occupancy response must be the same.
b. Note: Non-occupying co-mortgagors will always be “No” and must be on a separate URLA.
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