Standard FHA Loan Income Requirements

If you are planning to purchase or refinance a home using an FHA insured loan you should be aware of the standard FHA loan income requirements.

Front End Payments

FHA requires that your mortgage payments be no more than 29% of your effective income.  To determine this ratio, divide your new proposed mortgage payments by your total monthly gross income.  If that number is more than 0.29, you'll need to lower the mortgage payment or come up with more qualifying income. For example, a new mortgage payment of $1,000 with a monthly gross income of $5,000 yields a front end ratio of 0.20 or 20% ($1,000 / $5,000 = 0.20).

Back End Payments

FHA requires that your total debt be no more than 41% of your effective income.  To determine this ratio, you add the proposed mortgage payment to all your current debt payments including other loans, credit cards, car payments, etc. That total debt number is divided by your gross monthly income. If that number is more than 0.41 you need to lower your debt or come up with additional qualifying income to qualify for the FHA loan.  For example, a new mortgage payment of $1,000 with $500 car payment and $300 credit card payment with a monthly gross income of $5,000 yields a front end ratio of 0.36 or 36% ($1,800 / $5,000 = 0.36).

In some situations, lenders may gross up monthly income, or may exclude certain monthly debt obligations from the calculation.  Check with your local lender or a local FHA office to determine your eligibility.

 

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