Articles Tagged With: Debt-to-Income Ratio

October 10, 2011

FHA Loans and the Debt-To-Income Ratio

The debt-to-income ratio is an important calculation all home buyers need to understand. To qualify for an FHA home loan, potential borrowers should have a debt-to-income ratio of 43%. But what does that mean? According to the FHA, that means that the total mortgage payment plus all monthly financial obligations cannot exceed 43% of the borrower’s “gross effective income”. It’s important to point out that the debt-to-income ratio does include the mortgage payment–not the amount of the borrower’s current financial obligations alone at the time of the FHA loan application. Knowing the debt-to-income requirements can help a future borrower prepare for the FHA loan application because it’s as simple as doing the math on your income/expenses and set financial goals accordingly. If you know a year in advance that your | more...

July 14, 2011

FHA Loan Debt-To-Income Ratios: What’s Not Counted As ‘Debt’

By Joe Wallace

Getting approved for an FHA home loan means submitting a lot of personal information to the lender which is used to calculate a potential borrower’s ability to repay the loan. Your lender will ask for information on your current debts, credit lines, loans and other details. All of that information is compiled and compared to the amount of money the borrower gets from income sources the lender can verify. Once those details form a complete financial picture, the lender can make an educated decision on whether or not to approve an FHA home loan. The FHA allows 29% of your total monthly income to be used for housing costs and 41% towards housing expenses and other long-term debt. Getting that “debt picture” can be tricky–some income sources are not considered | more...