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
October 4, 2022 - FHA seller concessions are limited to a total of six percent. When a seller contributes more, it results in a lowering of the sale price for purposes of calculating the FHA loan amount, dollar for dollar on all money contributed that exceeds the six percent limit.
October 3, 2022 - First-time home buyer are likely to wonder about the kind of credit requirements needed for an FHA mortgage. According to Experian, there is no set minimum to buy a house. However, that does not mean you won’t have any minimum FICO score expectations from a lender or the FHA.
October 2, 2022 - When it comes to buying a home with a FHA guaranteed mortgage, the FHA loan program has some options buyers and sellers alike can use to make that closing a reality. How can buyer and seller come to a happy medium and close the deal?
October 1, 2022 - Violations of the Fair Housing Act have a chilling effect on the housing industry when violations occur for renters trying to buy a home. Those who rent while home shopping have a hard if they must compete against a volatile housing market and illegal discrimination at the same time.
September 30, 2022 - If you purchased a home with an FHA mortgage and you live in an area affected by a natural disaster, you may be eligible or become eligible for FHA loan relief. The Department of Housing and Urban Development publishes guidelines for lenders and borrowers who are affected.
