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
SEE YOUR CREDIT SCORES From All 3 Bureaus
Do you know what's on your credit report?
Learn what your score means.
FHA Loan Articles and Mortgage News
October 14, 2021 - Make the most informed decision about your refinance options as you can considering both. You can negotiate a better rate, monthly payment, or take cash out on the transaction if you choose your loan carefully and do so with an eye on your financial goals.
October 13, 2021 - The FHA and HUD have announced foreclosure relief measures and other disaster recovery options for those affected by flooding and storms in parts of Vermont during the summer of 2021. HUD extended an automatic 90-day foreclosure moratorium for Windham and Bennington counties.
October 12, 2021 - Do you have misconceptions about how FHA home loans work? Some people mistakenly count themselves out of the running for an FHA mortgage for reasons that simply are not true. Don’t count an FHA mortgage out of the running if you are comparing loan products to see which one is best for you.
October 9, 2021 - If you need a home loan, you’re likely planning and saving in advance of your application--applying for a home loan means putting money aside for a down payment, saving for closing costs, and working on your credit and debt ratio in the meantime.
October 6, 2021 - Are you interested in buying a condo unit with an FHA home loan? It’s an option some borrowers don’t realize they have--some make assumptions about the FHA home loan program and the availability of loans for condo units.
