January 28, 2011
Many people dream of home ownership, but the prospect of committing to a monthly mortgage payment is daunting for some. How can you tell if an FHA mortgage is right for you? Fortunately there are many tools online that can help a potential borrower determine whether they’re ready to take the plunge…or if their finances need a bit of work first.
One of the criteria for a successful FHA loan application is having the right debt-to-income ratio. An FHA borrower must have a debt-to-income ratio that totals no more than 41% in most cases. What does that mean in simple terms? Simply that the borrower’s total amount of debt–including a calculated mortgage payment–divided by the borrower’s gross monthly income, can’t be more than 41% of that income.
Fortunately there are online tools, like the one at GinnieMae.com, that can help you make these calculations quickly and easily. You’ll need to do a bit of homework first to collect the amounts of your car payment, credit card bills, and any other monthly obligations you have. Don’t forget to include your cell phone bill, any student loans, or other obligations (including any alimony or child support payments you make) in your figures for the most accurate results.
When using an online calculator, it’s important to factor in any additional income that may count in your favor when actually applying for an FHA home loan. For example, if you have a co-borrower or a spouse who will sign with you on the loan, be sure to include the relevant financial details from the other person’s contribution to the purchase. This will give you more accurate results, especially with calculators like the one at Ginnie Mae site where you can get a projected loan amount and other details based on the information you provide.
These online calculators are only for making estimates and don’t guarantee you anything from the FHA or a particular lender; they’re just a tool to help a potential borrower understand where they stand financially. They’re great for planning ahead, making budgets and creating strategies to lower your debt to income ratio should you need to in order to qualify for an FHA mortgage loan.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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