Debt to Income Ratios

Posted on January 2, 2009
Filed Under FHA Home Loans, Home Loans | 2 Comments

FHA Debt to Income Ratios  are used in determining if a borrower has adequate income to make the monthly mortgage payment.    The debt to income ratio is not the final or only determining factor in obtaining an approval for an FHA insured loan.

The 1st ratio is the mortgage payment divided by effective monthly income.

Take the total of the monthly principal, interest, taxes and insurance + ufmip and divide that total sum by the monthly income and that will give you the first ratio which is a maximum of 29% to qualify.

The 2nd ratio is the mortgage payment + all recurring and installment consumer debt, such as: car loans, credit card payments, student loans  and so forth.  Add up the total sum of all payments plus the PITI of the new mortgage and divide by the monthly income and that ratio should not exceed 41%.

On a case by case basis the lender may approve higher ratios but this will usually be a result of significant compensating factors.

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2 Responses to “Debt to Income Ratios”

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