FHA Direct Loans

Debt-to-Income Ratio Guidelines

 

In order to prevent any homebuyer from obtianing a loan they cannot afford,  FHA requirements and guidelines have been set in place requiring borrowers and/or their spouse to qualify according to set debt-to-income ratios guidlines or DTI.   The DTI is used to calculate whether or not a potential borrower is in a financial position that would meet the demands that are often included in owning a home.  To determine your DTI,  two ratios are evauated as follows:

 

Mortgage Payment to Income

 

Justs add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners' dues, etc.). Then, take that amount and divide it by the gross monthly income. The current maximum ratio to qualify is 31%

 

For Example:

 

• Total amount of new house mortgage payment: 800

• Borrower's gross monthly income (including spouse, if married): $3,500

• Divide total house payment by gross monthly income: $800/$3,500

• Your Debt-to-income ratio would be: 22.8 %

 

Total Fixed Mortgage/Expenses to Income

 

Just add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners' dues, etc.) and all recurring monthly revolving and installment debt (car loans, personal loans, student loans, credit cards, etc.). Then, take that amount and divide it by the gross monthly income. The current maximum ratio to qualify is 43%.

 

For Example:

 

• Total amount of new house mortgage payment: $ 800

• Total amount of monthly recurring expenses/debt: $400

• Total amount of monthly debt: $1,200

• Borrower's gross monthly income (including spouse, if married) $3,500

• Divide total monthly debt by gross monthly income: $ 1,200/3,500

• Your Debt to income ratio would be: 34.2%

 

It is important to note that the above indicators do not exclusively determine whether you will qualify for an FHA loan. Other factors may need to be considered, including credit history and job stability.