November 14, 2018

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Articles in Category: Debt Ratios

FHA Home Loan Debt-To-Income Ratios

FHA Home Loan Debt-To-Income Ratios

First-time home buyers looking at their FHA mortgage options hear a lot of about the debt-to-income ratio and how it affects the borrower’s ability to get a home loan approved. But do you know how the FHA lender is supposed to calculate that debt ratio? The rules governing this are found in the FHA loan handbook, HUD 4000.1. It explains to the lender that there are actually two debt ratio calculations that must be made. One is the total monthly mortgage payment compared to the total monthly income, the other is the total “fixed payment” compared to the borrower’s income. These debt ratios are complicated by the requirement that the income used to calculate the ratio must be lender-verified and certain kinds of unverifiable income will not count in the | more...

 
What Is An FHA Loan?

What You Need To Know About FHA Loans And Income Verification

What do borrowers need to know about FHA home loans and income verification requirements? The short answer is that it depends on several factors including the nature of the borrower’s job. Why is this true? Why isn’t there a standard answer? Because there are a variety of different employment types and FHA loan rules must address them. Self-employed borrowers are held to a different set of requirements because verifying that income requires a different set of procedures than for “traditional” employment. Those who work in the gig economy as contractors, 1099 workers, etc. are also in a different set of circumstances than a typical 9-5 worker, so those employees need their own procedures, too. FHA Loan Income Verification Rules For more traditional employment, the lender may require pay stubs, tax | more...

 
FHA Mortgage Loan, Dropping Home Prices, And Your Appraisal

How To Prepare For An FHA Mortgage: Check Your Spending

Do you know how to prepare for an FHA mortgage? If you aren’t currently doing a check on your spending as part of your mortgage loan preparation stage, you may need to run some numbers on your personal finances before you commit to house hunting and an FHA mortgage application. How To Take A Realistic Look At Your Monthly Spending Habits To Prepare For An FHA Home Loan Consider pulling your bank statements for the last year to review your spending habits, and pay close attention to the habits you notice over the most recent three to six months. Your financial institution may have a spending tracker for personal accounts that may help, or you may wish to invest in a personal finance app or tracking software to help you | more...

 
Will I Be Approved For An FHA Mortgage Loan?

Can I Use My GI Bill Housing Allowance For An FHA Home Loan?

Military borrowers who are considering an FHA home loan may wonder if they are permitted to use their Post 9/11 GI Bill housing stipend as part of their qualifying income for an FHA mortgage. FHA loan rules found in HUD 4000.1 require the lender to verify all sources of income for the borrower; verifiable income that qualifies may be counted in the borrower’s debt-to-income ratio. This process is important because if a borrower’s debts exceed a certain ratio compared to the amount of income, it may be harder for the lender to justify approving the FHA mortgage. So it makes sense that a borrower who qualifies for Post 9/11 GI Bill benefits or Forever GI Bill benefits might want to have their housing stipend included in the income they submit | more...

 
Finding A Lender For An FHA Mortgage

FHA Loans For Self-Employed Borrowers

Are there FHA home loans for self-employed borrowers? There’s a persistent myth about FHA loans and self-employment; that working for yourself is a serious disadvantage when it comes to home loan approval. What’s the reality? FHA Home Loans Are Available For Financially Qualified Self-Employed Borrowers FHA loan rules in HUD 4000.1 state that being self-employed is an acceptable form of primary income as long as that income meets certain criteria. Borrowers will be required to furnish tax returns, business plans, profit-and-loss statements and other documentation as required by the lender to verify income. It may take some extra time to gather all the required information your lender needs, but you should come to the application or preapproval process knowing how your income has changed over time. Self Employment Minimum Requirements | more...

 
FHA Mortgage Refinance Checklist

What Goes Into Your FHA Mortgage Payment?

What goes into your FHA mortgage payment? It’s easy to assume that you’re paying principal and interest, divided by the number of months you are obligated to on the mortgage note. But is that really all that goes into your monthly mortgage bill? The short answer is no, there’s more to it than that. FHA Loan Rules For Debt-To-Income Ratios HUD 4000.1, the FHA single family home loan handbook, has instructions for the lender to help determine a borrower’s credit-worthiness. The lender doesn’t just calculate the amount of your income versus how much debt you have going out on a monthly basis-that debt ratio has to be calculated with and without the mortgage payment to see what percentage of your monthly income is taken up by debt. The formula is | more...

 
FHA Refinance Loan Credit Questions And Answers

FHA Home Loan Resources You Should Know

FHA home loan resources you should know include online mortgage calculators, pre-qualification for a home loan, and the availability of free credit reports to help you in the research and planning stages of your new home loan or refinance loan. Get Your Free Credit Reports A Year In Advance Of Your Home Loan The government consumer watchdog agency, the Consumer Financial Protection Bureau (CFPB), reminds home loan applicants that they are entitled to “a free credit report every 12 months from each of the three major consumer reporting companies (Equifax, Experian and TransUnion)” according to the CFPB official site. Pulling your credit reports a year in advance is an excellent idea as it will give you plenty of time to deal with potentially outdated or inaccurate information, contest identity theft | more...

 
How Do Student Loans Affect My FHA Home Loan Application?

How Do Student Loans Affect My FHA Home Loan Application?

How do student loans affect my FHA home loan application? Some applicants worry about the amount of student loan debt they carry; after all the lender is required to determine the borrower’s debt-to-income ratio as a means to judge whether the loan is affordable or not. The debt ratio must be calculated using existing monthly debt, including student loans that are in forbearance. The fact that the loans are not being paid on at application time isn’t as critical as the idea that the loans may become a monthly obligation in the future, affecting the borrower’s ability to pay the mortgage loan. What do FHA loan rules say about student loans, and those student loans that are in deferment or forbearance? We use those two terms interchangably here, defined as | more...

 
FHA Loans And Your Credit Report: Check Ahead Of Time

FHA Home Loan Approval And Debt Ratios

How is FHA home loan approval affected by your debt ratio? Your credit qualifications including FICO scores and credit history are very important factors in home loan approval, but the amount of debt you carry is also a factor. Your participating FHA lender must evaluate your monthly debt versus your monthly income to determine if you can realistically afford the mortgage. How does the lender do this? The rules governing this process are found in the FHA loan handbook, HUD 4000.1. It begins by stating that the lender is required to “determine the Borrower’s monthly liabilities by reviewing all debts listed on the credit report, Uniform Residential Loan Application (URLA), and required documentation”. The lender must review all monthly financial obligations but some things may not necessarily be included in | more...

 
Five Things You Should Know About FHA Refinance Loans

FHA Loan Rules For Debt-To-Income Ratios: Business Debt

FHA loan rules for debt-to-income ratios (DTI) include guidelines for the lender when the loan applicant has debts listed in his or her name, but those debts are actually those of the borrower’s business. What do you need to know about this type of debt? Before addressing that issue, it’s important to point out that debt ratios are a very important part of the FHA loan approval process. The higher the amount of your monthly debt compared to your monthly income, the harder your loan officer has to work to justify approving the loan. A borrower with too much monthly debt may be required to have compensating factors as a condition of loan approval. Those factors can be a larger down payment, substantial savings in cash, or other things as | more...