4. A maximum debt-to-income ratio of 59%
Debt-to-income ratio is a way lenders determine whether you can afford your housing payments, by comparing the amount of money you make to what you owe. Currently, the maximum debt-to-income ratio for an FHA loan is 31%. In other words, if your monthly pretax salary is $6,000, your housing expenses should not exceed about a third of your income, or $1,860.
More realistically, however, debt-to-income ratio should factor in all of your recurring debts, including college and car loans. In this context, the FHA generally looks for a borrower’s total debt load not to exceed 59% of pretax income. To use the $6,000 example above, that would mean that the maximum amount you should be paying for your mortgage and other debts (credit card not included) is $2,580. Check this FHA handbook for more information.
5. The home must undergo a rigorous appraisal
While pretty much all loans require a home appraisal, so lenders can make sure their money isn’t funding a shack, FHA appraisal guidelines are more rigid than those for conventional loans, and not all houses will get the green light for FHA approval. This may mean that the seller of your desired home will need to make some repairs in order for your lender to approve the loan.
What are the FHA loan limits?
FHA loan programs only insure loans up to the maximum limit, which varies by county. In most areas, the limit is $417,000, but in certain high-cost areas, the limit is $636,150. You can see the FHA loan limits for your county at Hud.gov.
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