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
June 28, 2022 - With a home loan you should consider doing some calculations on the amount you pay on the loan principal and the interest, divided by the number of months you are obligated to on the mortgage note. Also consider a shortlist of other expenses that may be included.
June 26, 2022 - If you need to apply for an FHA home loan to renovate, the first thing you need to know is that while FHA loan rules say you may be allowed to be your own builder or contractor, doing so may be up to lender standards.
June 23, 2022 - What information do you need to have when you need to answer the question about how much your monthly mortgage payment be? It’s not just a matter of dividing the loan amount by the number of months and calculating the interest on your loan.
June 21, 2022 - FHA loans aren’t just for existing construction houses. There are also low down payment FHA loans that can help you build or renovate a home. An FHA One-Time Close mortgage is an option to consider, with its low 3.5% down payment requirement.
June 19, 2022 - The Department of Housing and Urban Development has announced more HUD funding to help Fair Housing agencies fight violations of the Fair Housing Act including illegal discrimination in the housing process. It’s the latest move in a wave of actions the agency has taken recently.
