What are compensating factors           

Taking a homebuyer education class

Amount of down payment. Putting down 10% in stead of 3%

Debt Ratios significantly under the maximums

Strong Credit or credit scores

Time on the job. The longer the better.

Time at current residence. The longer the better.

Down payment has been saved by the borrower verses getting a gift

Amount of money left in savings after the purchase. Often called reserves.

Change in current housing expense. A large increase in the borrowers housing expense would be unfavorable.

No recent (last 12 months) derogatory accounts or prior derogatory accounts were caused by extenuating circumstances.

A borrower has a debt ratio of 31/42. However, the borrower’s current housing expense is $900 and the new housing expense will be $750. Obviously this borrower has shown they have the ability to manage a higher payment.

A borrower has some 30 day late payments on consumer credit cards. However, borrower is putting down 15% of the purchase price of the home from their own savings.

A borrower is currently paying $300 per month in rent. The new house payment will be $800. However, after the borrower puts down their 3% for their down payment, the will still have $2,500 in reserves.