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:
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:
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 Requirements
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FHA Loan Articles and Mortgage News
November 30, 2020 - From the simple act of reviewing your credit scores all the way to getting an appointment with a local housing counselor to discuss how to properly get ready for your mortgage application, there are a variety of options to help you prepare for your loan.
November 27, 2020 - Up front costs are a typical part of doing business with an FHA mortgage. Anticipating your closing costs and down payment are an important part of the planning stages of your new loan. Do you know what you can avoid paying yourself up front?
November 25, 2020 - The most important thing to do as you consider how to approach a refi loan is determine what your goals for the new loan might be. Cash out at closing time is a motivator for some, a lower interest rate or mortgage payment is another.
November 23, 2020 - Getting prequalified is an initial step toward the loan. You are not committing to the mortgage yet, just exploring your options. You’ll want to have the general information about your income, the amount of debt you carry, your credit scores, and other details.
November 22, 2020 - FHA loan rules include instruction to your loan officer about how to process your employment information and also includes guidelines about how much time in the job market is required in order for you to be seriously considered as a home loan applicant.
