Understanding FHA loan ratios are an important part of getting your loan approved for a FHA home loan.

**There are two ratios that you need to know and understand when it comes to FHA loans.**

## FHA Front-end Ratio

The first one is what many people call the** “front-end ratio**.” This ratio is the percentage of the proposed house payment in relation to the borrower’s gross income. Currently, FHA guidelines say that the payment cannot be more than 31%of their gross income.

So, let’s say that the borrower has a gross income of $4500 per month. According to FHA requirements, their payment cannot be more than 31% of the $4500 income which would be a maximum payment of $1395. The front-end ratio simply looks at how much of a house payment you could qualify for based on your income.

## FHA Back-end Ratio

The second of the FHA loan ratios is what people call the **“back-end ratio.”** It is a similar measurement as the front-end ratio but it also includes the other monthly debts of the borrower. The current guideline for the back end payment is 43% of the monthly gross income.

Using the same information from above (the borrower with $4500 monthly income), we can use an example. Let’s say that the same borrower has a car payment of $350 per month and a credit card payment of $150 per month. Their total debts would be $1895 ($350 + $150 + $1395 = $1895). At $1895, they would have a total debt to income ratio of 42% which is below the FHA requirements.

What happens if someone is just over the ratio? There are options for working with someone in this situation. If the borrower has a lot of debts, they could simply pay some of them down. We could get a lower cost insurance policy which would lower the total house payment. Or…

FHA also allows for something called **“compensating factors.”** This means that they will make allowances for borrowers that have a higher ratio under certain circumstances. If these circumstances can be documented, there are options to go higher. The list is long but it could be a demonstrated ability to save money, a large down payment, previous credit history of paying a high payment for housing and the list goes on.

This is why you want to work with someone that knows the guidelines for FHA loans. I can help you find ways to get the loan approved and help you buy the home you want.