When you’re shopping for a mortgage, you can’t help but encounter acronyms, like LTV, FHA, VA, USDA and DTI, that it can feel like you’re wading through a bowl of alphabet soup. But, once you’ve got the acronyms down, it will feel a lot easier to understand important mortgage factors, like FHA DTI a.k.a. the debt-to-income ratio for FHA loans.
FHA debt-to-income ratio
When you are applying for a loan, including a Federal Housing Administration (FHA) mortgage, lenders factor in your debt-to-income ratio (DTI), or how your monthly debts compare to your monthly income. Since FHA loans are government-backed, the requirements are bit more flexible and often have lower DTI requirements than other loan types.
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How to calculate debt-to-income ratio
Regardless of which mortgage you are applying for, your DTI will be a factor. To calculate your DTI, you will need to divide your total monthly income by your monthly debts. Monthly debts can include your recurring monthly payments like rent, existing loan payments, and insurance payments, to name a few. As you round up your debt and income records, keep them on hand because you will need this same information to apply for a mortgage.
What’s a good debt-to-income ratio?
Debt-to-income ratios aren’t inherently good or bad and DTI requirements vary from lender to lender and from loan to loan. A good rule of thumb is to strive for a DTI below 48%, however there are loan programs that work with various debt-to-income ratios. If you have questions or concerns, talk to your PrimeLending home loan expert about your options, including potential assistance programs.
Mortgage FAQs
How does a mortgage work?
A mortgage is money you borrow from a lender to purchase a home and pay back over an agreed upon number of years. A mortgage payment includes paying the principal, interest, taxes and insurance fees. Try our free mortgage calculator to get an idea of what your mortgage payment may look like.
How to apply for a mortgage?
To apply for a mortgage, you will need to gather your financial information then have an appraisal, title search and inspection conducted. Once that is done the loan will be sent to underwriting and after it is approved you can close on your loan. The final step of the mortgage process is to settle into your home and relax.
How long does it take to get a mortgage?
How long it takes to get a mortgage depends on your mortgage needs and where you are at in the mortgage process, on average it takes around 30 days to get a mortgage, your experience will vary. The timeframe to get a mortgage depends on each lender’s requirements so it is important to discuss your goals with a mortgage expert.
