Texas FHA Loans

Close on time, Credit Scores as low as 500

Texas FHA Loans

Close on time, Credit Scores as low as 500

TexasFHA.org

Let us Help You

get a better mortgage rate

Best Mortgage Refinance Company in Houston Texas

FHA Debt-to-Income Ratio Requirement

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.

FHA Debt-to-Income Ratio Requirement

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.

What is DTI Ratio?

The debt-to-income (DTI) ratio allows lenders to measure a borrower’s ability to manage monthly payments and repay debts. The debt ratio paints a clear picture of whether borrowers are financially able to purchase a home and the associated living costs that come with it. The debt-to-income ratio is an FHA loan requirement that considers these two factors.

  • Front-end ratio

The first ratio is the mortgage payment expense compared to the effective income. You take the proposed mortgage monthly payment with this ratio and divide it by the buyer’s gross income.

  • Back-end ratio

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.

FHA Loan Benefits and Advantages

Compared to conventional loans, FHA carries a lower interest rate. Since HUD insures the loan against future default, it is offered a lower rate.

Minimum requirement for an FHA loan is only 3.5% compared to 5% on conventional loans. The borrower can also get a “gift” from family members to be used as a down payment on the house.

Required minimum credit score for an FHA loan is lower compared to the conventional counterpart. TexasFHA.org will extend an FHA loan to borrowers with middle FICO scores as low as 580. 

FHA loans can go as high as 57% debt-to-income (DTI) ratio with an automated underwriting system approval. Conventional loans can only go as high as 45% DTI. What does this mean? This allows the home buyer to purchase a higher sales price home. Lots of times, the higher DTI decides if a borrower qualifies for a home loan or not. 

What is DTI Ratio?

The debt-to-income (DTI) ratio allows lenders to measure a borrower’s ability to manage monthly payments and repay debts. The debt ratio paints a clear picture of whether borrowers are financially able to purchase a home and the associated living costs that come with it. The debt-to-income ratio is an FHA loan requirement that considers these two factors.

  • Front-end ratio

The first ratio is the mortgage payment expense compared to the effective income. You take the proposed mortgage monthly payment with this ratio and divide it by the buyer’s gross income.

  • Back-end ratio

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.

FHA Loan Benefits and Advantages

Compared to conventional loans, FHA carries a lower interest rate. Since HUD insures the loan against future default, it is offered a lower rate.

Minimum requirement for an FHA loan is only 3.5% compared to 5% on conventional loans. The borrower can also get a “gift” from family members to be used as a down payment on the house.

Required minimum credit score for an FHA loan is lower compared to the conventional counterpart. TexasFHA.org will extend an FHA loan to borrowers with middle FICO scores as low as 580. 

FHA loans can go as high as 57% debt-to-income (DTI) ratio with an automated underwriting system approval. Conventional loans can only go as high as 45% DTI. What does this mean? This allows the home buyer to purchase a higher sales price home. Lots of times, the higher DTI decides if a borrower qualifies for a home loan or not. 

FHA DTI Limits

The current debt-to-income ratio for an FHA loan is 36/45, meaning the borrower’s income cannot exceed 36% of their gross income for housing-related debt. The maximum ratio should be 45% of the borrower’s gross income for the total debt, including the proposed housing expense. However, the back-end ratio can be as high as 50% for some borrowers, especially those with excellent credit. The back-end ratio can go higher than 55% with “compensating factors.” Some lenders may even go as high as 57% ratio if several compensating factors may help the lender decide to extend the loan or not.

Every lender uses different criteria in qualifying borrowers based on debt-to-income ratios. The FHA guideline for the back-end ratio is 456%; 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.

Debt To Income Ratio

FHA DTI Limits

The current debt-to-income ratio for an FHA loan is 36/45, meaning the borrower’s income cannot exceed 36% of their gross income for housing-related debt. The maximum ratio should be 45% of the borrower’s gross income for the total debt, including the proposed housing expense. However, the back-end ratio can be as high as 50% for some borrowers, especially those with excellent credit. The back-end ratio can go higher than 55% with “compensating factors.” Some lenders may even go as high as 57% ratio if several compensating factors may help the lender decide to extend the loan or not.

Every lender uses different criteria in qualifying borrowers based on debt-to-income ratios. The FHA guideline for the back-end ratio is 456%; 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.

Debt To Income Ratio

FHA Compensating Factors

Credit, Income, and Asset constitute a mortgage loan; all three must be present. If one of these factors is below par, the other two may compensate for the lack thereof. Several factors may compensate when one aspect is lacking. Generally, if a borrower’s credit score is at 580 and the file is not getting approval from the Automated Underwriting System (AUS), a higher down payment or lower loan-to-value (LTV) may help. Conversely, having an additional income, thus, lowering your DTI, may help generate an automated approval. In short, a higher down payment or a lower DTI ratio may compensate for the lack of credit.

Specific guidelines and requirements can be obtained by contacting our FHA Home Loan Specialist at 800-854-4142.

FHA Loan Specialist In Texas

An FHA Loan Specialist Ready 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. You may also chat with us to get a quick answer to your questions.

FHA Fast Loan Process In Texas

We Make The FHA Loan Process Quick & Easy

Lenders often times will steer their clients away from an FHA loan due to their inexperience with the program.  FHA Loans are a great source of funding for our clients.  We share our knowledge and experience with FHA loans, making it easier for borrowers.

FHA Approved Lender In Texas

FHA Approved Lender

The Federal Housing Administration requires lenders offering FHA loans to go through an extensive approval process. We are FHA-approved and designated as a “Full Eagle” FHA mortgage lender offering FHA-insured home loans in Texas.

FHA Loans Help Make Home Ownership 

Possible For a Wider Range of People.

Connect With Us

Address

2300 Highland Village Rd., Ste 2218
Highland Village, TX 75077

Phone

800-854-4142

Email Address

info@texasfha.org

business hours

Monday - Friday: 9:00 am to 6:00 pm Saturday: 9:00 am to 12:00 pm