FHA Ratios Guidelines 2018

FHA Ratios Guidelines 2018

FHA Ratios Guidelines 2018

Debt to income ratios are the calculations underwriters use to determine whether a borrower can qualify for a mortgage. They are used to determine if you have the capacity to repay your mortgage.

There are two calculations.

  • The first or Front Ratio is your housing expense-to-income ratio. This is your proposed mortgage payment (principle, interest, taxes, mortgage insurance, and home owners insurance) divided by your gross monthly income.
  • The second or Back Ratio is your total monthly obligations-to-income ratio. This is your gross monthly payment including Mortgage PITI divided by your gross monthly income.

FHA loan requirements include a maximum debt to income ratio. When a borrower applies for an FHA mortgage, they are required to disclose all debts, open lines of credit, and all possible approved sources of regular income. Using this data, the bank and the FHA calculate the borrower's debt-to-income ratio.

FHA guidelines maximum debt to income ratio is 55% with compensating factors. Most lenders will limit maximum debt-to-income to under 50% and some lenders to 45%.

Minimum Credit Score

FHA allows a borrower with a credit score of 580 to buy a home with only a 3.5% down payment. FHA guidelines allows a borrower with a minimum credit score of 580 to buy a home using their own funds for a down payment or the down payment funds can be a gift from a family member.

FHA guidelines allows a home buyer with a minimum credit score above 580 up to a 6% seller concessions. The seller concessions must be written into the sales contract.

FHA requires a minimum credit score of 500 for all loans.

Home buyers with a credit score below 580 are required to make a 10% down payment. The down payment funds can belong to the borrower or can be a gift from a family member. Up to 6% seller concessions are allowed. 

Closing cost - FHA allows the seller to pay up to 6% of your closing cost.

If you are buying a $100,000.00 house FHA allows the seller to pay up to $6,000.00 for your closing cost. It must be in writing in the sales contract, "Seller will pay up to 6% of buyer's closing cost."

If you do not write it into the sales contract then you will be paying the closing cost. In the state of Florida closing cost for a $100,000.00 house average around $4,300.00 depending on taxes, insurance and who's paying the transfer tax and owner's title insurance.

By allowing the seller to pay for your closing cost you will decrease the amount of money required to buy a home. Buying a $100,000.00 property requires $3,500.00 down payment and if the seller pays up to $6,000.00 for your closing cost you will only need around $4,000.00 to buy a $100,000.00 in Florida.

Are you short funds to close? The FHA no closing cost loan allows all of your closing cost to be rolled into your loan including your appraisal fee, hazard insurance premium and even your escrow account.

Are you a first time home buyer? Do you need to get pre-approved for a first time home buyer program in Florida?

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FHA Ratios Guidelines 2018 FHA Ratios Guidelines 2018

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FHA loans

FHA loans require a minimum 500 credit score to buy a house or refinance

500 credit score

VA loans

VA loans require a minimum 500 credit score to buy a house or refinance

500 credit score

Fannie Mae

Fannie Mae loans require a minimum 620 credit score to buy a house or refinance

620 credit score

USDA loans

USDA loans require a minimum 580 credit score to buy a houseor refinance

580 credit score

HOMEPATH

HomePath loans require a minimum 620 credit score to buy a house

620 credit score

HARP refinance

HARP loans require no minimum credit score torefinance

No minimum credit score

Freddie Mac

Freddie Mac loans require a minimum 620 credit score to buy a house or refinance

620 credit score

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