Articles in Category: Debt Ratios

When Is An FHA Loan Better Than A Conventional Loan?

July 6, 2026

FHA Loans And Community Property States

One of the most common questions we are asked about FHA mortgages involves state community property laws, non-borrowing spouses, and their credit issues. Does an FHA loan applicant have to include a non-borrowing spouse’s financial information when applying for an FHA mortgage? The answer depends on where the borrower resides and where the property is located. If either is in a community property state, the transaction may be affected because state law can make one spouse responsible for certain debts incurred by the other spouse. For FHA loan purposes, non-borrowing spouse debt generally means debt owed by a spouse that is not also owed by, or in the name of, the borrower. A spouse is not required to become a borrower or co-signer simply because the couple lives in a | more...

July 1, 2026

FHA Home Loan Rules For Salary, Hourly, Part-Time Income

By Bruce Reichstein

Not every home loan applicant has the same type of employment, compensation, or schedule of compensation. That’s why FHA home loan rules include different instructions to the lender for a diverse range of income sources. FHA Loan Rules For “Primary Income” FHA loan rules have sections for hourly income, salary, and part-time income. The section that includes these guidelines states that the lender is responsible for examining earnings from the home loan applicant’s “primary employment” and defines it as follows: “Primary Employment is the Borrower’s principal employment, unless the income falls within a specific category identified below. Primary employment is generally full-time employment and may be either salaried or hourly.” “Current Pay” Versus “Projected Pay” According to FHA loan rules, applicants who earn a salary will generally have their current | more...

March 1, 2026

How Long Do You Need to Be Employed to Qualify for an FHA Loan?

By Bruce Reichstein

The FHA loan application process includes many steps, including running a credit report and having the FHA borrower fill out paperwork with personal information like open lines of credit and current income. Applying for a government home loan also requires giving the lender two types of personal history--a record of where the borrower has lived and where the borrower has worked. FHA requirements dictate furnishing at least a two-year work history, but that requirement shouldn't be mistaken for an employment minimum. According to the FHA's official site, "FHA does not impose a minimum length of time a borrower must have held a position of employment to be eligible for a mortgage."

January 20, 2026

FHA Loan Rules for Loan Approval: Federal Debts and Tax Liens

By Bruce Reichstein

FHA loan approval rules include specific requirements regarding unpaid federal debts and federal tax liens. These rules are outlined in HUD’s Single Family Housing Policy Handbook 4000.1 and are enforced by FHA-approved lenders. When you apply for an FHA mortgage, your lender must evaluate your income, employment history, credit profile, and all monthly financial obligations. This includes determining whether you have delinquent federal non-tax debt or delinquent federal tax debt, both of which can affect FHA loan eligibility. Understanding how FHA treats federal debts and tax liens can help borrowers avoid unnecessary delays or loan denials. FHA Loans and Delinquent Federal Non-Tax Debt According to HUD Handbook 4000.1, FHA lenders are prohibited from approving loans for borrowers who have delinquent federal non-tax debt. Federal non-tax debt includes obligations such as: | more...

January 15, 2026

An Introduction to the FHA Debt-to-Income (DTI) Ratio

By Bruce Reichstein

FHA loans require many things from the borrower. The credit report, residence history, employment history and a list of all current outstanding debt must all be furnished to give the lender and the FHA a good picture of the borrower as a credit risk. When it comes to government home loans, all the information is needed since credit scores are not the determining factor in whether or not the FHA mortgage is approved. An FHA borrower with good credit, a solid work history and a track record of on-time payments would seem to be a shoo-in for an FHA home loan. But there's one thing that can offset the good things for the borrower if his or her debt-to-income ratio isn't within the limits for an FHA loan.

July 16, 2025

FHA Home Loan Approval Problems: New Credit Applications

By Joe Wallace

You may have heard advice about seeking new credit while you are in the home loan process. Much of this advice is definitely applicable, especially in times of economic uncertainty and questions about the direction of the housing market. Anyone who advises you NOT to apply for new credit once you have started your home loan journey is thinking with your best interests in mind, but what is it about this advice that makes it so critical? A lender doesn’t pull your credit reports just once during the home loan process, and if your lender sees new information that potentially changes your ability to qualify for the mortgage, it may be necessary to re-approve you for the loan. And that’s just the presence of new credit in your report. What | more...

June 26, 2025

Home Loan Preparation: Credit Issues

By Joe Wallace

Are you worried about your credit ahead of your home loan application? Do you need to do to prepare your credit before you move forward? There are avenues that can help you get ready for a home loan, including advice and assistance with credit questions. We’ll examine your options in this area below, but first it is important to review some of the most common credit problems that stand in a borrower’s way. Home loan and refinance loan approval is not impossible, but for some borrowers, it’s necessary to take some extra time to work on credit issues. Here are some credit concerns you should pay attention to so you can raise your credit score: Late And Missed Payments This is one of the main reasons consumers are denied loans. | more...

February 18, 2025

FHA Home Loan Approval Versus Your Debts

By Joe Wallace

In 2025 a successful FHA home loan application means taking some extra time in the planning stages to work on your financials including your credit scores and the amount of debt you carry. Some borrowers don’t view those two issues as being equal…at first. FHA Loan Approval Factors You Should Know Your FICO score range is an important part of the data your lender uses to justify approving your mortgage. But it isn’t the only benchmark. Did you know that to be approved for an FHA mortgage, try to come to the loan application process with a debt ratio of 43% or less? That means your monthly outgoing debt takes up no more than 43% of your monthly income. Managing Your Debt Ratio: How To Get Started The Consumer Financial | more...

August 5, 2024

The Myth Of The No Money Down FHA Loan

By Joe Wallace

Many readers want to know if there are any “fair credit” and “no money down” loans for FHA borrowers. While such options may exist in loan programs offered by other agencies, the FHA Single Family Home Loan program does not have a “zero down” option or a “fair credit” home loan. FHA mortgage loans for new purchases require a minimum of 3.5% down, which must come from approved sources that have to be verified by the lender. Some borrowers may be confused by the Department of Veterans Affairs and its VA home loan program. VA Zero-Down Mortgages VA loans feature a no-money-down option, but these loans are only available to qualified borrowers who have served a minimum time in the armed services. FHA loans don’t have this option. Both programs | more...

June 6, 2024

Home Loan Choices

By Bruce Reichstein

Every part of the home loan process has a set of choices to make. For most house hunters this process begins with the decision to own your own home and quit renting. What other choices await you on the road to homeownership? Interest Rate Options: Conventional, FHA, Fixed, Adjustable No matter which type of home loan you choose, VA, FHA, USDA, or conventional, you’ll need to decide whether to apply for a fixed or adjustable mortgage. The fixed-rate loan is good for those who need a predictable house payment for the full duration of the mortgage. Unless you refinance, the rate will not change. An adjustable-rate mortgage has an introductory period (typically at a lower rate) followed by periods of rate adjustments. FHA adjustable-rate mortgages may, for some borrowers, be | more...