If your current mortgage is holding you back from buying your next home due to a lack of ability to qualify for a new mortgage loan, the Debt-To-Income (DTI) Drop program might be your solution.
DTI is a quick look at how much of your gross monthly income goes toward debt and whether you’re in a good position to repay the loan back. You learn more about DTI ratios here.
This loan program allows you to buy your next home while temporarily exempting your current mortgage from your DTI calculation, making it easier to qualify.
A DTI Drop is designed for borrowers who:
- Do not need to tap into the equity of their current home
- Want to remove their existing mortgage liability from their DTI
- Want to lower their DTI to buy their next home
- Buy their next home non-contingent (no clause to sell your home first)
A lower DTI makes for a stronger buyer and can result in better loan terms. It also dramatically strengthens the buyer’s offer as they won’t have a contingency to sell their current home first.
Some traditional ways you can lower your DTI are:
- Paying off any existing debt (prioritizing high-interest debt is a good idea)
- Avoiding new debts and additional loans (like credit cards or car loans)
- Increasing your monthly income
- Refinancing or consolidating existing loans
DTI Drop Program Details:
- When you sell your current home, a 1% fee applies: For homes priced under $500,000, there’s a minimum fee of $5,000.
- You must list your current home within 21 days of buying the new one (penalty of $250 per day if not listed on time).
- You have 120 days to sell your current home.
If you need to access your home’s equity, the Buy Before You Sell (BBYS) program is still available, but it comes with a higher fee of 2.4% (minimum $9,000).
Why It Matters:
Lowering your DTI means more options:
- Easier mortgage approval
- Better interest rates
- Increased loan options and more flexibility
If your current mortgage is getting in the way of your future home, the DTI Drop program could be the right fit. Give us a call at (760) 930-0569 to talk through your goals and see if this option makes sense for you.
