Admittedly I’m using info from 1990/1991 because that is when i bought my first house and the fha ceiling was 41%, the default rate back then was steady in the 5-8% rate and had been stable until 2001 when it broke 10% and kept climbing. DTI’s during the recent boom were virtually non existent.
I’m not saying it’s ideal, just that it can be done. FHA loans were not designed for people at the apex of their careers, it was primarily for first timers. I had a 41% dti, but I was like 22 or 23 years old, every year that number went down as my income increased.
And the answer to the question about what happens if there is extended unemployment, divorce, etc, is that you sell the house. No dti can calculate that, you stop working, you stop owning, that is not new, I’m sure of it. The part about raising a family and saving for retirement, people who make 60k gross don’t get to raise families and buy houses on that, plain and simple. That example is for they typical college grad buying a little condo for under 200k. So in my mind, since fha was using that 41% 20 years ago and had a lower default rate, even through boom and bust cycles, the culprit of todays problems isn’t that 41%.
Would I buy today with a 41% dti, hell no! I’m over 40, my earnings are near their peak in my career, I do have kids to send to college, and pay for cars and insurance, etc., etc., etc. so I’m more conservative, but at this point in my life I’m not who that loan is intended for, when I was, it worked, that’s all I’m saying.
I could be wrong on this but I was trying to research the history of dti’s and found that during the boom years of 2005,2006, they were using 59%, so was conventional, if that is true, that is crazy. But then again on a stated income loan, there is no dti, I believe that is the biggest reason things went to pieces.
