FHA loan program was created to help increase homeownership. Buying a home easier with FHA and less expensive than other types of real estate mortgage home loan programs.
FHA Loan Ratios
PITI it stands for principal, interest, taxes and insurance and includes not only the monthly principal and interest payment but also the hazard insurance payment, mortgage insurance payment, flood insurance payment, homeowner’s association dues and 1/12 of the annual property taxes.
However, borrower's often have other monthly debt obligations in addition to mortgage payments. The ratio of these combined debts to gross monthly income must be calculated separately. This ratio is called the debt-to-income ratio and is calculated by dividing the sum of the PITI payment plus the minimum monthly debt payments by the gross monthly income. Also stated as a percentage, calculate it as follows
(PITI + Mthly Debt Pmts) divided by Gross Monthly Income = Debt-to-Income Ratio Other debt payments include revolving charges (credit cards, department store cards, etc.), payments on installment debts that have more than 10 remaining payments (car loans, student loans, signature loans, etc.) and any alimony and/or child support payments. The following sections look into the major areas of qualifying
Debt
Debt is a word your FHA loan officer uses to describe any situation that you borrow money. "Too much debt" is how the industry describes situations where people borrow more money than they can easily repay. There are a lot of types of debt: credit card debt, department store debt, charge accounts, auto loans, student loans, mortgages, and money that you may owe the Internal Revenue Service. You might also borrow from parents, relatives, and friends, although those debts may not be reflected in your credit report.
Your ability to borrow more money or to have your credit extended is directly reflected by how much debt you carry. Mortgage lenders, for example, determine your purchasing ability by applying a debt-to-income ratio (a ratio that is calculated by totalling your monthly debt payments plus the proposed monthly debt payment divided by your gross monthly income). Too high of a debt-to-income ratio reflects greater risk with the loan and may result in rejection of the credit application. Most mortgage lenders will allow you to pay up to 42 percent of your gross monthly income in debt service. Of course this may vary depending upon the loan size, the type of loan, and the type of property you are purchasing.
FHA Credit Issues
General FHA guidelines regarding a person credit history
FHA guidelines Full Article.
First Time Homebuyer
Owning a home can be a significant first step in attaining financial independence. We can help you eliminate rent payments, build equity, and feel the personal satisfaction of calling a home your own. With our Mortgage Guarantee, you can have a pre-approved mortgage amount before you decide on the home you want. Your pre-approved mortgage provides you the buying power of a cash buyer.
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