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Thursday, January 2, 2014
Louisville Kentucky FHA Requirements for First Time Home Buyers using FHA loans
Gifts: FHA borrowers may need less cash up front if they can obtain a gift from family, friends, or other sources.
Credit Scores: As of April 1st, when the debt-to-income ratio exceeds 43 percent and the borrower has a credit score of 620 or less the loan application must be manually reviewed. Manual underwriting can be useful because it allows lenders to consider compensating factors when looking at a loan."
Debt Ratios: Generally there are two debt standards to consider: first, homeownership costs -- generally mortgage principal, mortgage interest, property taxes and property insurance, also known as "PITI" or the "front-end ratio" -- can equal no more than 31 percent of gross monthly income. Second, borrowers can qualify for FHA financing when all regular debts -- the back-end ratio -- do not exceed 50 percent of gross monthly income. The back-end ratio includes PITI, car loans, credit cards, education loans, etc.
Gross monthly income is the money you earn before income taxes. If you earn $60,000 a year that's $5,000 a month. If PITI can be as much as 29 percent of your gross monthly income it means basic homeownership costs can total as much as $1,450 per month while overall debts -- the "back-end ratio" can be as much as $2,150 per month (43 percent) in this example.