FHA guidelines have been set requiring borrowers and/or their spouse to qualify according to set debt to income ratios.

FHA Loan Rates

July 4, 2015
FHA Rates for July 4, 2015
30 Year Fixed
3.5% Rate
3.74% APR
15 Year Fixed
2.75% Rate
3.0% APR
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FHA Requirements

Debt-to-Income Ratio Guidelines

In order to prevent homebuyers from getting into a home they cannot afford, FHA requirements and guidelines have been set in place requiring borrowers and/or their spouse to qualify according to set debt to income ratios. These ratios are used to calculate whether or not the potential borrower is in a financial position that would allow them to meet the demands that are often included in owning a home.

The two ratios are as follows:

1) Mortgage Payment Expense to Effective Income

Add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners' dues, etc.). Then, take that amount and divide it by the gross monthly income. The maximum ratio to qualify is 31%.

See the following example:

Total amount of new house payment:
$750
Borrower's gross monthly income (including spouse, if married):
$2,850
Divide total house payment by gross monthly income:
$750/$2,850
Debt to income ratio:
26.32%

2) Total Fixed Payment to Effective Income

Add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners' dues, etc.) and all recurring monthly revolving and installment debt (car loans, personal loans, student loans, credit cards, etc.). Then, take that amount and divide it by the gross monthly income. The maximum ratio to qualify is 43%.

See the following example:

Total amount of new house payment:
$750
Total amount of monthly recurring debt:
$400
Total amount of monthly debt:
$1,150
Borrower's gross monthly income (including spouse, if married)
$2,850
Divide total monthly debt by gross monthly income:
$1,150/$2,850
Debt to income ratio:
40.35%

Please note that the above indicators do not exclusively determine whether or not a candidate will qualify for an FHA loan. Other factors will be considered, including credit history and job stability.

FHA Loan Articles

Read About Mortgage News, FHA Updates, and Guidelines
Appraisals and the Crawl Space

Appraisals are an important part of the FHA loan process, and we get plenty of questions about what may or may not be acceptable in the appraisal. For some, depending on the age and design of the home, crawlspaces can be a worry.

Rules on Personal Property Included With a Home Sale

There are situations where a buyer wants to purchases a home with an FHA loan and the seller will try to sweeten the deal by offering to include personal property such as appliances, vehicles, or other items. Including such things would require the lender to deduct the value of all the included items from the loan amount.

MIP Reduction and Cancelled FHA Loan Case Numbers

The answer to this question is fairly simple. Any FHA borrower with a forward mortgage longer than 15 years (excluding the exceptions mentioned above) who has an FHA loan case number assigned on or after January 26, 2015 is eligible for the new, lower annual MIP.

FHA Reduces Annual Mortgage Insurance Premiums

FHA made an announcement about cuts in the annual mortgage insurance premium (MIP) in a preliminary January 2015 announcment. The new FHA policy reduces the rate for most Title II forward mortgages with terms greater than 15 years.

Private Mortgage Insurance Requirements

One common question we get involves Private Mortgage Insurance and the premiums for that insurance. Borrowers should discuss PMI policy changes with a loan officer.