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.
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FHA Loan Articles and Mortgage News
May 11, 2018 - For those who want to rehab an existing home rather than having one built from scratch, the FHA 203(k) rehab loan is an important option. This FHA mortgage, which is also available as a refinance loan, allows the borrower to make renovations and improvements to the property.
May 6, 2018 - Conventional mortgages require private mortgage insurance (PMI) unless the borrower makes a lender-prescribed down payment that eliminates the need. FHA mortgage loans are different. They don’t require PMI, but they do require an Up Front Mortgage Insurance Premium and a mortgage insurance premium (MIP) instead.
April 28, 2018 - When you examine your FHA construction loan options, choosing between a One-Time Close construction loan and other construction loan options with two loans and two closing dates are only part of your decision-making process.
April 22, 2018 - One of the main issues with construction loans with two closing dates is that there is no guarantee that the borrower will qualify for the second loan. Borrowers who do not use FHA One-Time Close loans must be careful with credit and related financial issues.
April 16, 2018 - FHA One-Time Close construction loan options are available for borrowers who wish to apply for an FHA mortgage, but don’t want to buy an existing property. Not all borrowers understand they have options for this type of loan-options that include VA and even USDA construction loans for qualified applicants.
FHA.com Reviews
FHA.com is a one-stop resource for homebuyers who want to make the best decisions when it comes to their mortgage. With our detailed, mobile-friendly site, individuals can access information about different FHA products, the latest loan limits, and numerous other resources to make their homebuying experience easier. Take a look at some of the reviews from other FHA.com visitors!
