FHA Debt to Income Ratios

According to FHA guidelines, borrowers and / or their spouse must qualify according to set debt ratios which are used to determine whether the borrower can reasonable be expected to meet the expenses involved with home ownership. There are two ratios.

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 29%.

	Total amount of new house payment:	$650.00
	Borrower's gross monthly income (including spouse, if married):	$2,400.00
	Divide total house payment by gross monthly income:	$650.00/$2,400.00
	Debt to income ratio:	27.08%

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 41%.

	Total amount of new house payment:	$650.00
	Total amount of monthly recurring debt:	$300.00
	Total amount of monthly debt:	$950.00
	Borrower's gross monthly income (including spouse, if married):	$2,400.00
	Divide total monthly debt by gross monthly income:	$950.00/$2,400.00
	Debt to income ratio:	39.58%

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.

First-time homebuyers considering an FHA home loan have plenty of questions, including one of the all-time most popular early inquiries: “How much can I borrow?” If you have done some Internet research on FHA loan limits in the past, check again—some reports are now out of date because of recent changes to the rules for FHA lending limits. FHA-insured mortgages and mortgage insurance requirements can be confusing, but the facts are simple. FHA home loans aren’t any more difficult to understand than a conventional loan. You just need to learn the lending vocabulary. When you decide to apply for an FHA Refinance loan, there are several questions you’ll need to answer to set the approval process in motion. Some questions are about planning issues, others are directly related to whether or not an FHA Refinance loan is for you.