The Federal Housing Administration has elected to use the Department of Veterans Affairs' residual income test as a new compensating factor to qualify borrowers with high debt-to-income ratios.

Under the new manual underwriting guidelines that go into effect April 21, applicants that pass the VA residual income test can have DTI ratios of up to 37% on the front end and 47% on the back end. The standard DTI limit is 31/43 with no compensating factors.

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