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
January 15, 2022 - The FHA home loan program offers options for borrowers who want to buy a typical suburban home, but there are also loan options for mobile homes and condo units. These loans are known as Title I loans and can be used to buy or refinance these homes.
January 14, 2022 - Did you know that you can get help with the FHA required minimum down payment, for example, but that the money must be documented from start to finish before the lender can allow you to use it? You can ask your participating lender for instructions on what should be submitted.
January 13, 2022 - If you are new to the home loan process or have never applied for an FHA mortgage before, loan approval may seem a bit mysterious at first. There are three basic stages to the home buying process you should be mindful of: prequalification, pre-approval. and closing.
January 12, 2022 - How many unsolicited e-mails, junk mail and robocalls have you received in the last year related to refinancing or home equity loans? It’s these unsolicited contacts that should arouse suspicion, but many still fall for mortgage and refinance-related schemes every year.
January 11, 2022 - Do you need a real estate agent when purchasing and financing a home with an FHA loan? That question is tough to answer because so much depends on your specific circumstances. There are times when you might want the help of a real estate agent, and times when you might not.
