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Articles in Category: Debt Ratios

FHA Mortgage Loan

Income Rules For FHA Loan Approval: What You Need To Know Today

FHA home loans, like other mortgages, require the lender to make sure their applicants have enough income to be able to realistically afford the loan. This is known as “qualifying income” and the lender is only permitted to use earnings that meet FHA standards. Those paychecks must be stable, and likely to continue for the purpose of debt-to-income ratios and other loan approval procedures. Those regulations apply regardless of whether you are buying existing construction or want to build a house on your own lot using an FHA construction loan so it’s important to be familiar with them. Military Pay And Earnings: Yes, military people have access to the GI Bill and the VA home loan program, why would they need an FHA home loan? There are actually many reasons, | more...

 
FHA Loans

FHA Home Loan Rules About Borrower Debt

Do you know what your lender is required to do when you fill out an FHA mortgage loan application? Part of the lender’s job is to make sure that the loan applicant can realistically afford the new home loan, and making that determination means reviewing your current debt. HUD 4000.1, the FHA Lender’s Handbook for single family mortgages, has instructions for the lender in this area. It begins stating the lender’s responsibilities: “The Mortgagee must determine the Borrower’s monthly liabilities by reviewing all debts listed on the credit report, Uniform Residential Loan Application (URLA), and required documentation.” How is that accomplished? “All applicable monthly liabilities must be included in the qualifying ratio. ” Your lender will calculate your debt ratio using one method that includes only your current debt, and | more...

 
FHA Loans

FHA Loans For First-Time Borrowers: Debt Ratios

One area that is just as important as FICO scores and credit reports to first-time borrowers? The amount of debt versus the amount of monthly income. This is known as a debt-to-income ratio or debt ratio for short; this is just as crucial for a borrower as their FICO scores. Many borrowers already know this; they have spoken to a lender or a housing counselor, or they have done their research already and fully understand that if you have too much outgoing debt and not enough monthly income, your home loan chances are in jeopardy. But what is not as well-known? The fact that there are actually TWO debt ratios the lender will look at. Yes, there are two calculations and if you don’t anticipate the second one you may | more...

 
Home Loans

FHA Home Loan Income Limits Do Not Exist

Some borrowers confuse the features of the FHA home loan program with other government-backed loans, but when it comes to the question of income limits, FHA borrowers do not need to worry-there are NO income limits for FHA home loans. Those who misunderstand the FHA loan program as a need-based home loan option are likely confusing FHA mortgages with USDA loans, which are need-based and DO have income limits. Real estate purchases with FHA loans are not the same as their USDA counterparts. FHA Mortgages Are Not Just For First-Time Home Buyers We repeat: FHA mortgages are not only for first-time home buyers, and they are not restricted to those who may fall into a lower income category. Any financially qualified borrower can be approved for an FHA mortgage as | more...

 
FHA mortgage

Home Loan Credit Problems: Unresolved Borrower Debt

What can jeopardize a home loan application? There are many factors, but delinquent and unresolved debt are two areas that first-time home buyers should be keenly aware of; these issues can derail a mortgage loan application depending on the severity and amount of the debt. We discuss debt ratios and related issues in this space all the time; the unresolved debt issue is related to debt ratios in a way (the resolution of the debt will likely add to the debt ratio in some way) but an account that is delinquent, and/or in dispute is a separate area altogether. It’s always best to apply for any major line of credit with a minimum of 12 months of on-time payments; anything less could threaten your ability to get loan approval. But | more...

 
the importance of credit for home loan approval

FHA Home Loan Debt-To-Income Ratios

First-time home buyers looking at their FHA mortgage options hear a lot of about the debt-to-income ratio and how it affects the borrower’s ability to get a home loan approved. But do you know how the FHA lender is supposed to calculate that debt ratio? The rules governing this are found in the FHA loan handbook, HUD 4000.1. It explains to the lender that there are actually two debt ratio calculations that must be made. One is the total monthly mortgage payment compared to the total monthly income, the other is the total “fixed payment” compared to the borrower’s income. These debt ratios are complicated by the requirement that the income used to calculate the ratio must be lender-verified and certain kinds of unverifiable income will not count in the | more...

 
Getting Ready For Your Home Loan

What You Need To Know About FHA Loans And Income Verification

What do borrowers need to know about FHA home loans and income verification requirements? The short answer is that it depends on several factors including the nature of the borrower’s job. Why is this true? Why isn’t there a standard answer? Because there are a variety of different employment types and FHA loan rules must address them. Self-employed borrowers are held to a different set of requirements because verifying that income requires a different set of procedures than for “traditional” employment. Those who work in the gig economy as contractors, 1099 workers, etc. are also in a different set of circumstances than a typical 9-5 worker, so those employees need their own procedures, too. FHA Loan Income Verification Rules For more traditional employment, the lender may require pay stubs, tax | more...

 
Home loans

How To Prepare For An FHA Mortgage: Check Your Spending

Do you know how to prepare for an FHA mortgage? If you aren’t currently doing a check on your spending as part of your mortgage loan preparation stage, you may need to run some numbers on your personal finances before you commit to house hunting and an FHA mortgage application. How To Take A Realistic Look At Your Monthly Spending Habits To Prepare For An FHA Home Loan Consider pulling your bank statements for the last year to review your spending habits, and pay close attention to the habits you notice over the most recent three to six months. Your financial institution may have a spending tracker for personal accounts that may help, or you may wish to invest in a personal finance app or tracking software to help you | more...

 
FHA Loan

Can I Use My GI Bill Housing Allowance For An FHA Home Loan?

Military borrowers who are considering an FHA home loan may wonder if they are permitted to use their Post 9/11 GI Bill housing stipend as part of their qualifying income for an FHA mortgage. FHA loan rules found in HUD 4000.1 require the lender to verify all sources of income for the borrower; verifiable income that qualifies may be counted in the borrower’s debt-to-income ratio. This process is important because if a borrower’s debts exceed a certain ratio compared to the amount of income, it may be harder for the lender to justify approving the FHA mortgage. So it makes sense that a borrower who qualifies for Post 9/11 GI Bill benefits or Forever GI Bill benefits might want to have their housing stipend included in the income they submit | more...

 
FHA loans

FHA Loans For Self-Employed Borrowers

Are there FHA home loans for self-employed borrowers? There’s a persistent myth about FHA loans and self-employment; that working for yourself is a serious disadvantage when it comes to home loan approval. What’s the reality? FHA Home Loans Are Available For Financially Qualified Self-Employed Borrowers FHA loan rules in HUD 4000.1 state that being self-employed is an acceptable form of primary income as long as that income meets certain criteria. Borrowers will be required to furnish tax returns, business plans, profit-and-loss statements and other documentation as required by the lender to verify income. It may take some extra time to gather all the required information your lender needs, but you should come to the application or preapproval process knowing how your income has changed over time. Self Employment Minimum Requirements | more...