Articles Tagged With: Debt-to-Income Ratio

December 11, 2023

FHA Home Loan Approval Versus Your Debts

In 2024, a successful FHA home loan application means taking some extra time in the planning stages to work on your financials including your credit scores and the amount of debt you carry. Some borrowers don’t view those two issues as being equal…at first. FHA Loan Approval Factors You Should Know Your FICO score range is an important part of the data your lender uses to justify approving your mortgage. But it isn’t the only benchmark. Did you know that to be approved for an FHA mortgage, try to come to the loan application process with a debt ratio of 43% or less? That means your monthly outgoing debt takes up no more than 43% of your monthly income. Managing Your Debt Ratio: How To Get Started The Consumer Financial | more...

November 30, 2023

Avoiding Foreclosure in 2024

By Bruce Reichstein

Do you want to buy or build a home with an FHA loan? When planning and saving, consider what happens after closing day once you accept the keys, schedule the movers, and take possession of your new house. What’s the big issue to remember here? Future borrowers in the budgeting and planning stages must choose how much cash to pay at closing time. And so far out from that first mortgage payment it may feel tempting to save a bit on your out-of-pocket expenses and finance certain closing costs like the FHA loan upfront mortgage premium. There is an issue called “cost creep” that some borrowers may experience. Financing one closing cost might not hurt your bottom line too much. And from there some justify adding even more to the | more...

October 19, 2022

FHA Home Loan Approval And Debt Ratios

By Joe Wallace

How is FHA home loan approval affected by your debt ratio? Your credit qualifications including FICO scores and credit history are very important factors in home loan approval, but the amount of debt you carry is also a factor. Your participating FHA lender must evaluate your monthly debt versus your monthly income to determine if you can realistically afford the mortgage. How does the lender do this? The rules governing this process are found in the FHA loan handbook, HUD 4000.1. It begins by stating that the lender is required to “determine the Borrower’s monthly liabilities by reviewing all debts listed on the credit report, Uniform Residential Loan Application (URLA), and required documentation”. The lender must review all monthly financial obligations but some things may not necessarily be included in | more...

November 30, 2021

Do I Have To Make A Down Payment On An FHA Mortgage?

By Joe Wallace

One variation of a commonly asked question about FHA home loans is, “Do I have to make a down payment on an FHA mortgage?” This question gets asked sometimes in reference to other government-backed loans that feature no down payment (available via a Department of Veterans Affairs program offered to qualifying military members and certain military spouses only). FHA home loans do require money down-the borrower’s minimum required investment is 3.5% of the adjusted value of the home. But the borrower does not always have to pay that money out of pocket. Why? State and local down payment assistance programs can help–a borrower using a state or local program that meets FHA standards for third-party down payment help could save thousands upfront on the loan. What kind of standards are | more...

April 30, 2021

FHA Home Loan Rules For Income: VA Benefits, Disability

By Joe Wallace

Home loan approval depends on a variety of factors–your credit score, history of on-time payments on your financial obligations, and your income. Where your paycheck is concerned, FHA loan rules say the income must be verifiable and likely to continue in order to be counted for purposes of approving your FHA mortgage. FHA home loan rules in HUD 4000.1 say that certain benefits may be counted as verifiable income–the rules allow the use of disability benefits to financially qualify for the loan. But there are borrowers who worry their disability income won’t be counted for the purposes of the loan. In cases where such income meets FHA standards, the borrower likely has nothing to worry about. Those standards are found in HUD 4000.1 and start with a basic definition of | more...

March 23, 2021

Preparing Your Finances For An FHA Mortgage: Debt

By Joe Wallace

The debt-to-income ratio is a calculation that your lender will use to determine the amount of your monthly financial obligations compared to the amount of income you have. The debt-to-income ratio is an important tool for the lender. The more income you have compared to outgoing payments every month the better, your lender needs to justify you as a good credit risk. So how do borrowers with a lot of debt deal with this problem? This is an important factor because if the ratio is too high yor lender can’t justify the loan. Borrowers should learn what the FHA considers to be “debt” and what things are not automatically counted as part of your debt ratio in order to view their finances the way the lender will. FHA Home Loans | more...

March 22, 2021

FHA Loan Approval: Credit Scores Are Just One Factor

By Bruce Reichstein

Some house hunters worry that they don’t have credit scores good enough to qualify for the mortgage. But it’s easy to lose sight of the fact that FICO scores are not the single determining factor in home loan approval. There Are THREE Important Factors Some FHA loan applicants come to the process knowing that both FICO scores and your record of on-time payments are crucial for loan approval. But even this is an incomplete picture of what your lender is after when trying to approve your home loan application. By this point in our article, you are likely getting the hint that there is indeed a third factor that counts when applying for a mortgage loan, and that factor is your debt-to-income ratio. The participating FHA lender’s job is to | more...

January 12, 2021

What Affects My FHA Loan Approval? Debt Ratio Issues

By Bruce Reichstein

Every mortgage or finance blog includes a lot of writing and advice about the need to monitor your credit reports. And make no mistake, this is important advice that is good to follow, but if you are in the market for a new home in 2021 the amount of monthly debt you have compared to your monthly income will be just as important for loan approval. Why Your Debt Matters Some applications crunch the numbers and believe they can afford the loan on paper. But what happens when that does not match what the lender gets when she runs your debt ratio numbers? People who technically qualify on paper but not in reality are bad risks for the lender and their jobs depend on screening out those bad risks. And | more...

May 22, 2020

Home Loan Approval And The Amount of Your Debt

By Bruce Reichstein

Do you need to consider your home loan options? FHA mortgages offer much for both first-time buyers and repeat borrowers. Your choices include new purchase loans, One-Time Close construction loans, reverse mortgages, cash-out FHA refinance loans, and Streamline refinance options when you’re ready to consider a refi loan. No matter what kind of loan you need, for best results you should set aside some time in the early stages of your loan planning; review the last 12 months of credit and loan repayment history and have a good look at your debt-to-income ratio. It is vitally important to do this before the lender does. The Amount Of Debt You Carry Matters The debt to income ratio or DTI for short is one of the most important factors in the lender’s | more...

January 17, 2020

Home Loan Approval And Your Income

By Bruce Reichstein

Home loan approval means submitting your employment and income information to the lender, who must verify the information for accuracy. There are things you can do to help the process work in your favor if you know about certain nuances of the home loan approval process. Important Takeaways From This Article: Know how the lender checks your income data; Study the FHA home loan rules for employment and income, especially if you are self-employed, a commission earner, or a contractor; Know how frequent job changes may affect your loan; Shop around for a loan even if you think you’ve found a good bank; Know How The Lender Operates Some people mistakenly assume that income and employment verification are formalities; they are not. Your lender is required by law to carry | more...