FHA Mortgage Program Borrower Qualification
Edited by Harry Jensen
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The FHA uses a set of guidelines based on a borrower's gross monthly income and debt to determine the size of mortgage a borrower can qualify for- To qualify for an FHA mortgage a borrower must have a debt-to-income ratio (DIR) of no more than 43%. The debt-to-income ratio represents the maximum acceptable percentage of a borrower's monthly gross income that can be spent on total monthly housing expense (MHE) plus other monthly debts such as credit card, auto and student loans
- Total monthly housing expense includes your monthly mortgage payment PLUS other housing-related expenses such as property tax, homeowners insurance and FHA mortgage insurance premium (MIP) as well as other potentially applicable expenses such as homeowners association (HOA) fees
- The 43% maximum debt-to-income ratio consistent with the debt-to-income ratio typically used by lenders for conventional mortgage programs but higher than the debt-to-income ratio used for VA mortgages
- Remember, the debt-to-income ratio is calculated using gross income, or your income before any deductions such as taxes and social security, and not net income
Use our FHA MORTGAGE QUALIFICATION CALCULATOR to understand what size FHA mortgage you can afford according to FHA borrower qualification guidelines
- Our FHA mortgage qualification calculator applies a debt-to-income ratio of the 43% to your gross income to determine what size mortgage, mortgage payment and monthly housing expense you can afford
The FHA also typically requires that the borrower have a minimum credit score of 580 although there are some cases where a borrower can obtain an FHA mortgage with a credit score less than 580 and certain FHA programs may require a credit score greater than 580- We recommend that you review your credit report and score six months to a year before you start the mortgage process to avoid negative surprises and address potential issues you identify with your credit profile
The example below demonstrates the size of FHA mortgage a borrower qualifies for based on applying the 43% debt-to-income ratio FHA guideline- The example is based on a 30 year fixed rate mortgage of 4.250% and assumes the borrower makes a down payment of 3.5%About the author
FHA Borrower Qualification Example
- Annual Gross Income
- $60,000
- Monthly Gross Income
- $5,000 ($60,000 ÷ 12 = $5,000)
- Other Monthly Debt Payments
- $275
- Max Monthly Housing Expense (MHE) Plus Other Debt Expense Based
on 43% Debt-to-Income Ratio - $2,150 ($5,000 * 43% = $2,150)
- Estimated Maximum Monthly Housing Expense (Principal, Interest,
Property Taxes, Property Insurance, Mortgage Insurance Premium) - $1,875 ($2,150 - $275 (other monthly debt) = $1,875)
- Estimated Monthly Mortgage Payment
- $1,425
- Estimated Monthly Property Taxes and Insurance
- $245
- Estimated Ongoing Monthly FHA Mortgage Insurance Premium
- $205
-
Estimated Mortgage Amount for which the Borrower Qualifies
(based on a 30 year fixed rate mortgage with an interest rate of 4.250%) - $289,700
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