June 28, 2022

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Articles Tagged With: Debt-to-Income Ratio

Do I Have To Make A Down Payment On An FHA Mortgage?

Do I Have To Make A Down Payment On An FHA Mortgage?

One variation of a commonly asked question about FHA home loans is, “Do I have to make a down payment on an FHA mortgage?” This question gets asked sometimes in reference to other government-backed loans that feature no down payment (available via a Department of Veterans Affairs program offered to qualifying military members and certain military spouses only). FHA home loans do require money down-the borrower’s minimum required investment is 3.5% of the adjusted value of the home. But the borrower does not always have to pay that money out of pocket. Why? State and local down payment assistance programs can help–a borrower using a state or local program that meets FHA standards for third-party down payment help could save thousands upfront on the loan. What kind of standards are | more...

 
FHA loans

FHA Home Loan Rules For Income: VA Benefits, Disability

Home loan approval depends on a variety of factors–your credit score, history of on-time payments on your financial obligations, and your income. Where your paycheck is concerned, FHA loan rules say the income must be verifiable and likely to continue in order to be counted for purposes of approving your FHA mortgage. FHA home loan rules in HUD 4000.1 say that certain benefits may be counted as verifiable income–the rules allow the use of disability benefits to financially qualify for the loan. But there are borrowers who worry their disability income won’t be counted for the purposes of the loan. In cases where such income meets FHA standards, the borrower likely has nothing to worry about. Those standards are found in HUD 4000.1 and start with a basic definition of | more...

 
Is your credit ready for an FHA loan?

Preparing Your Finances For An FHA Mortgage: Debt

The debt-to-income ratio is a calculation that your lender will use to determine the amount of your monthly financial obligations compared to the amount of income you have. The debt-to-income ratio is an important tool for the lender. The more income you have compared to outgoing payments every month the better, your lender needs to justify you as a good credit risk. So how do borrowers with a lot of debt deal with this problem? This is an important factor because if the ratio is too high yor lender can’t justify the loan. Borrowers should learn what the FHA considers to be “debt” and what things are not automatically counted as part of your debt ratio in order to view their finances the way the lender will. FHA Home Loans | more...

 
Buying a House

FHA Loan Approval: Credit Scores Are Just One Factor

Some house hunters worry that they don’t have credit scores good enough to qualify for the mortgage. But it’s easy to lose sight of the fact that FICO scores are not the single determining factor in home loan approval. There Are THREE Important Factors Some FHA loan applicants come to the process knowing that both FICO scores and your record of on-time payments are crucial for loan approval. But even this is an incomplete picture of what your lender is after when trying to approve your home loan application. By this point in our article, you are likely getting the hint that there is indeed a third factor that counts when applying for a mortgage loan, and that factor is your debt-to-income ratio. The participating FHA lender’s job is to | more...

 
Is your credit ready for an FHA loan?

What Affects My FHA Loan Approval? Debt Ratio Issues

Every mortgage or finance blog includes a lot of writing and advice about the need to monitor your credit reports. And make no mistake, this is important advice that is good to follow, but if you are in the market for a new home in 2021 the amount of monthly debt you have compared to your monthly income will be just as important for loan approval. Why Your Debt Matters Some applications crunch the numbers and believe they can afford the loan on paper. But what happens when that does not match what the lender gets when she runs your debt ratio numbers? People who technically qualify on paper but not in reality are bad risks for the lender and their jobs depend on screening out those bad risks. And | more...

 
FHA 203(k)Home loan

Home Loan Approval And The Amount of Your Debt

Do you need to consider your home loan options? FHA mortgages offer much for both first-time buyers and repeat borrowers. Your choices include new purchase loans, One-Time Close construction loans, reverse mortgages, cash-out FHA refinance loans, and Streamline refinance options when you’re ready to consider a refi loan. No matter what kind of loan you need, for best results you should set aside some time in the early stages of your loan planning; review the last 12 months of credit and loan repayment history and have a good look at your debt-to-income ratio. It is vitally important to do this before the lender does. The Amount Of Debt You Carry Matters The debt to income ratio or DTI for short is one of the most important factors in the lender’s | more...

 
FHA Home Loan Income Rules

Home Loan Approval And Your Income

Home loan approval means submitting your employment and income information to the lender, who must verify the information for accuracy. There are things you can do to help the process work in your favor if you know about certain nuances of the home loan approval process. Important Takeaways From This Article: Know how the lender checks your income data; Study the FHA home loan rules for employment and income, especially if you are self-employed, a commission earner, or a contractor; Know how frequent job changes may affect your loan; Shop around for a loan even if you think you’ve found a good bank; Know How The Lender Operates Some people mistakenly assume that income and employment verification are formalities; they are not. Your lender is required by law to carry | more...

 
FHA Refinance Loans And Current Interest Rates

FHA Home Loan Rules About Borrower Debt

Do you know what your lender is required to do when you fill out an FHA mortgage loan application? Part of the lender’s job is to make sure that the loan applicant can realistically afford the new home loan, and making that determination means reviewing your current debt. HUD 4000.1, the FHA Lender’s Handbook for single family mortgages, has instructions for the lender in this area. It begins stating the lender’s responsibilities: “The Mortgagee must determine the Borrower’s monthly liabilities by reviewing all debts listed on the credit report, Uniform Residential Loan Application (URLA), and required documentation.” How is that accomplished? “All applicable monthly liabilities must be included in the qualifying ratio. ” Your lender will calculate your debt ratio using one method that includes only your current debt, and | more...

 
Down payment

Preparing For An FHA Mortgage? What You Need To Know About “Contingent Liabilities”

If you are preparing for a home loan and want to buy a primary residence with an FHA mortgage, you should know what the FHA loan rules are for “contingent liabilities” which involve the borrower. A contingent liability is a financial obligation that the FHA loan applicant has co-signed for in the past or is otherwise potentially responsible for should the main borrower default on the financial obligation. The FHA loan handbook defines contingent liabilities specifically as follows: “A Contingent Liability refers to a liability that may result in the obligation to repay only when a specific event occurs. For example, a contingent liability exists when an individual can be held responsible for the repayment of a debt if another legally obligated party defaults on the payment. Contingent liabilities may | more...

 
FHA ARM Loans

FHA Loans For First-Time Borrowers: Debt Ratios

One area that is just as important as FICO scores and credit reports to first-time borrowers? The amount of debt versus the amount of monthly income. This is known as a debt-to-income ratio or debt ratio for short; this is just as crucial for a borrower as their FICO scores. Many borrowers already know this; they have spoken to a lender or a housing counselor, or they have done their research already and fully understand that if you have too much outgoing debt and not enough monthly income, your home loan chances are in jeopardy. But what is not as well-known? The fact that there are actually TWO debt ratios the lender will look at. Yes, there are two calculations and if you don’t anticipate the second one you may | more...