Debt to Income Ratios for FHA Loans
Qualifications for an FHA loan also take into consideration the borrower and the co-borrowers debt-to-income (DTI) ratio. There are specific requirements with regards to debt-to-income-ratios to help protect the buyer from being approved for a loan they cannot truly afford. If you recall the real estate bubble we endured around 2006 – 2008, much of the result of that was accredited to lenders funding loans that buyers genuinely did not qualify for. In today’s mortgage lending environment, there are checks and balances in place to avoid this from happening again.
The debt ratio paints a clear picture of whether borrowers are in a financial position to purchase a home and the associated living costs that comes with it. The debt-to-income ratio is an FHA loan requirement that takes these two factors into consideration. The first ratio is the mortgage payment expense compared to the effective income. With this ratio, you take the proposed mortgage monthly payment and divide it by the buyer’s gross income. The second ratio is the total of all debts, installment and revolving accounts, combined with the proposed housing payment versus the borrower’s effective income. For this equation take your monthly mortgage payment, add all your debts and divide it by the gross monthly income.
Every lender uses different criteria in qualifying borrowers based on debt-to-income ratios. The FHA guideline for back-end ratio is at 50%, some lenders can go as high as 55%. TexasFHA.org offers a home loan with a back-end ratio requirement of up to 57% with compensating factors. This allows a borrower to purchase a slightly higher priced home.
Specific guidelines and requirements can be obtained by contacting our FHA Home Loan Specialist at 281-860-2533.
An FHA Loan Specialist Available to Help You
Our FHA Loan Specialists are always available to help you and answer any questions. You may contact a dedicated FHA Loan Specialist through our website or by calling us directly.
We make the FHA Loan Process Quick & Easy
It’s not a secret that lenders often times will steer their clients away from an FHA loan due to their inexperience with the process. We find FHA Loans to be a great source of funding for our clients. We share our knowledge and experience with FHA loans, making it easier to get compared to conventional financing.
FHA Approved Lenders
The Federal Housing Administration requires lenders offering FHA loans to go through an extensive approval process. Amcap Mortgage Ltd. is an FHA approved lender specializing in FHA Loans in Texas.