Articles Tagged With: Debt-to-Income Ratio

August 31, 2017

Can I Get An FHA Home Loan If I Owe Back Taxes?

Can I get an FHA home loan if I owe back taxes? The answer to this question depends on more than one factor, the most important being whether or not the borrower is delinquent on the taxes owed. In general, borrowers who come to the home loan process with delinquent accounts will find it difficult to get loan approval. Borrowers should expect to come to the FHA home loan process with a minimum of 12 months of on-time payments for all financial obligations. That said, disputed accounts and/or issues connected to identity theft may have different requirements (police reports, documentation of the issues, etc.) When it comes to taxes, FHA loan rules emphasize the requirement to be in a satisfactory payment arrangement with the creditor and a minimum period of | more...

August 24, 2017

Do Section 8 Housing Vouchers Count For FHA Loans?

By Bruce Reichstein

There are many different types of income that can be used to qualify for an FHA home loan. While there is no minimum or maximum income requirement to qualify for an FHA mortgage, the borrower’s debt-to-income ratio, stability and duration of income, and other factors will be scrutinized as part of the loan application process. Some income is simple to verify. Other types of income have have additional requirements. That is true of certain public assistance including Section 8 Housing Choice vouchers and income received from government-run public assistance programs. In these cases the duration of the payments will be an important factor. Using Section 8 Housing Choice Vouchers As Income The FHA loan handbook, HUD 4000.1, states on page 210 that a lender is responsible for verifying the nature | more...

July 18, 2017

How Do You Refinance An FHA Loan?

By Bruce Reichstein

How do you refinance an FHA loan? There are some important questions to answer before getting to the actual application process-questions that can help you narrow down the right kind of FHA mortgage refinance loan for you. Examining Your Financial Goals and Needs FHA refinance loans come in a variety of types designed to fit different financial needs. Are you looking for a refinance loan that will lower your monthly mortgage payments? Do you need to take cash back on the refinance loan transaction? Depending on circumstances, those two issues may or may not be mutually exclusive. FHA refinance loans do offer the ability to get into a lower payment or interest rate, but getting cash back likely involves a different kind of FHA refinance loan. Deciding what result you | more...

Can my seller pay some of my closing costs?

June 21, 2017

FHA Loan Income Requirements

By Joe Wallace

How much or how little can you earn and still qualify for an FHA loan? Do you know what the FHA loan income requirements are for the type of mortgage loan you seek? The truth is, the FHA home loan program does not specify a minimum (or maximum) dollar amount necessary to qualify for an FHA home loan or FHA refinance loan. Instead, the lender is required to make sure you qualify with FICO scores, credit history, and an acceptable debt-to-income ratio. FHA Debt To Income Ratio There are two ways your participating FHA lender will review your income compared to your financial obligations in order to qualify you for an FHA mortgage. The first is to review the amount of verifiable income you bring in and compare it to | more...

FHA Loans And Natural Disasters: What You Should Know

November 15, 2016

FHA Loans And Debt: A Student Loan Question

By Joe Wallace

A reader asks, “I am a mother who is on a fixed income of $1600.00 a month in ft laud. my son is going to be the co borrower who lives and works in LA. Makes a good salary. We already got pre-qualified up to 300k, our credit score is above 680…question is my son has student loan of 33k and is in forbearance until next year. Will this be a problem with (an) FHA loan?” FHA loan rules in HUD 4000.1 instruct the lender on how to view debt, debt ratios, and the kinds of debt known as “deferred obligations” which may not affect the borrower’s debt to income ratio in the short term, but can do so after a home loan has closed. Sometimes, FHA loan approval may | more...

October 4, 2016

FHA Loan Facts And Fiction: First Time Home Buyers

By Joe Wallace

First time home buyers come to the FHA loan process with many questions. There are some long-held misconceptions about FHA mortgages that borrowers should know long before they fill out a loan application. Let’s examine some of them. One myth about FHA loans, and one of the most common, is that the FHA itself lends money to loan applicants. This is not true. Instead, the borrower must find a participating FHA lender, who has been certified by the FHA to issue home loans under the FHA single-family loan program. Another misconception has to do with the nature of the FHA loan program itself, which offers affordable home loans to all qualified applicants regardless of their status as a home buyer. That means that first time home buyers and those who | more...

September 20, 2016

FHA Loan and Monthly Debt

By Joe Wallace

In order to insure an FHA loan applicant is a good credit risk, the lender must review the potential borrower’s FICO scores, employment, and debt-to-income ratio. The debt ratio is an important part of the overall determination for lenders to approve or deny an FHA loan application. That’s one reason we often point out that FICO scores alone don’t make or break a home loan application, but instead a variety of factors are used to approve the loan; FHA requirements include your loan repayment history, FICO scores, debt to income ratio, and employment history. HUD 4000.1 instructs the lender to review a borrower’s monthly financial obligations on page 177, stating: “The Mortgagee must determine the Borrowers monthly liabilities by reviewing all debts listed on the credit report, Uniform Residential Loan | more...

August 31, 2016

FHA Loan Debt To Income Ratio Rules: Student Loans

By Joe Wallace

When the lender is adding up an FHA loan applicant’s income and monthly financial obligations for the purpose of calculating debt ratios, there are some debts that can be more complicated than others. Student loans, for example, can be tricky because a borrower may have student loan debt that is in “deferred” status, while others may be paying on their loans at the time of the loan application or soon thereafter. Here’s a recent reader question on the subject: “I cannot find anything that talks about NON deferred student loans. I have a client with a $63 payment on their credit report ($25,000 student loan balance). The loan is NOT in deferment, he pays $63 per month. The u/w is telling me I must use the greater of 1% of | more...

What happens to my FHA loan in a natural disaster?

July 11, 2016

Home Loan Debt Ratios Explained

By Joe Wallace

Analyzing Your Debt Ratio from FHA.com on Vimeo. When you fill out a home loan application, your lender will need employment and income documentation in order to process your loan. The lender is responsible for verifying that you have employment and that your income is sufficient to justify the loan. Not all income counts as “verifiable” by the lender; FHA loan rules have guidelines that include making sure the income is stable and likely to continue. Your lender may also have standards which must be met where income is concerned. There are many types of income, and not all of it comes from employment. Do you receive government assistance, get payments from a trust fund, are entitled to pay or benefits from a government agency related to disability, child support, | more...

May 13, 2016

FHA Loan Questions: Non-Borrowing Spouse Debt

By Joe Wallace

FHA loan rules for calculating a borrower’s debt to income ratio are found in HUD 4000.1. There’s an issue some borrowers face when applying for an FHA mortgage that involves whether or not a non-borrowing spouse’s financial data needs to be included in the debt ratio calculation. This issue affects borrowers in states that have community property laws. Such laws govern how a legally married couple’s debts and other financial affairs are viewed in the context of the legal relationship. The debts and financial obligations incurred by legally married couples in these states are often shared regardless of who actually takes out the loan, applies for the credit card, etc. So in these states, certain extra considerations are required of the lender in the home loan application process. If you | more...