The rest of the mortgage industry calls this the front-end ratio. Total Mortgage Payment In evaluating your mortgage expense, your lender will assess the total mortgage payment, which includes:. Other Included Costs Your lender will total these mortgage-related costs and divide them into your monthly gross income.
The DTI mortgage expense ratio should be 31 percent or lower. When evaluating your ability to afford your home, the FHA looks not only at your mortgage expense but also at other amounts you owe — your debt. To see if you meet FHA standards, you need to show the amounts of your existing revolving and installment debt. The mortgage industry calls this your back-end ratio. For revolving debt, use your annual statement or prepare several months of statements.
Your lender will determine how many months to submit. Installment Debt Installment debt is debt in which the amount you pay is the same each month for the duration of the loan. Once you submit these documents, your lender takes the total amount of your mortgage expenses, plus all your recurring monthly revolving and installment debt and weighs that against your pre-tax income.
The FHA's rule of thumb is that your total fixed payment expenses should be no more than 43 percent of your gross monthly income. Expect that if you have a DTI above 43 percent and a credit score below , you will undergo additional underwriting scrutiny. You must disclose all debts and open lines of credit on your loan application. You might wonder why you need to describe your open line of credit. These can become debt if the homebuyer goes on a shopping spree before closing, so the FHA directs lenders to keep an eye on open lines of credit.
Disclose your college loans, balances on your credit cards, auto loans, and how much you'll pay in both auto insurance and homeowners insurance. Include any personal loans from family, and other debts. Spousal and child support obligations are considered debt to the person required to make the payments. You credit score and credit history are different but related sources of information lenders use to decide whether to approve your loan application.
Your score is a predictive statistic and guess at your likelihood of repaying a loan. When it comes to credit scores, bigger is better. Lenders offer the best rates to borrowers who have the highest FICO credit scores. The FHA minimum credit score is However, if you want a loan with a 3.
Borrowers with low scores must come up with a 10 percent down payment. The credit score standard is a bit deceiving in practice. It is common for lenders to place the bar higher and require a , a or even higher score. Lenders may not go below the FHA's minimum credit score, but are free to require higher scores. These higher standards are known as lender overlays and they vary from lender to lender.
Zach Wichter. Written by. Zach Wichter is a mortgage reporter at Bankrate. Edited By Suzanne De Vita. Edited by. Suzanne De Vita. Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Reviewed By Shashank Shekhar. Reviewed by. Shashank Shekhar. Share this page. Bankrate Logo Why you can trust Bankrate. Bankrate Logo Editorial Integrity.
Key Principles We value your trust. Bankrate Logo Insurance Disclosure. What is an FHA loan? FHA loans vs. Read more From Zach. About our review board. You may also like Mortgage rates crush it again, plunge to a new all-time low. New VA rules aimed at curbing predatory lending for cash-out mortgage refinances. Is a no-closing-cost refinance right for you?
The upfront mortgage insurance premium is one of the closing costs you'll pay with an FHA loan, though it can be rolled into the total amount of the loan. Many banks, credit unions and online mortgage lenders offer FHA loans. These loans require borrowers to pay for private mortgage insurance, just as FHA loans require borrowers to pay government mortgage insurance.
Other low-down-payment loans. Member FDIC. Equal Housing Lender. Skip to main content. About us Financial education. Support Locations Search. Before you go, be sure you know: This link takes you to an external website or app, which may have different privacy and security policies than U. You are here:. FHA loan calculator. Take the next step.
Prequalify Use this FHA mortgage calculator to get an estimate. Our mortgage specialists are ready to help. Want us to call you? Request a call.
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