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Can one still carry debt and qualify for an FHA loan?

Asked by Trulia Brooklyn, Brooklyn, NY Tue Mar 12, 2013

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Derek W’s answer
The answer is Yes. FHA mortgages have a more strict process of enforcing debt to income ratio's. Your debt has what is referred to as "Front End" ratio and "Back End" ratio, which under FHA guidelines normally fall in the range 33/38. Conventional mortgages, allow higher debt ratios, which therefore allow you to purchase a more expensive home. I have seen the ratios go up to 45/54. There is also an higher interest rate by 0.5% on average, which is not significant.

If you have a prospective buyer, I am able to provide them with more information on financing options, if they chose to work with me as a "Buyers Agent". Contact me anytime at 914-299-0420.
0 votes Thank Flag Link Sun Mar 24, 2013
Absolutely can. Obviously, any and every lender will to a debt-to-income ratio analysis and determine how much of a mortgage the borrower will qualify for. So the more debt that a borrower carries, the less of a mortgage they'll be able to qualify for.

This doesn't necessarily apply to FHA only, it's pretty much the way it goes with almost every mortgage program out there.

The exception: not ALL debt is allowed. Tax liens, any defaulted government insured loans and in general, collections, charge-offs and judgments all need to be satisfied in order to get FHA approval.

If my response was helpful, consider clicking BEST ANSWER!

Javier Meneses
Senior Loan Officer
NMLS #23130
310 Crossways Park Drive
Woodbury, NY 11797
(516) 606-9648
0 votes Thank Flag Link Tue Mar 12, 2013
It is almost a requirement that you have some debt when you apply for an FHA loan. The TOTAL scorecard requires at least one account to have at least a 12 month payment history. Yeah, I know, the existing debt could have been paid off last month, etc. But that is not how most buyers are when it comes to buying a home. I do not remember a client using an FHA loan that did not have other payments, and my timeline goes way, way back. Thousands of deals and all of them had other payments.

Jim Simms
NMLS # 6395
Financing Kentucky One Home at a Time
Web Reference:
0 votes Thank Flag Link Tue Mar 12, 2013
You can carry debt as long as your total debt to income ratio fits within FHA guidelines. In order to find out the answer, a consumer should get themselves pre-qualified for the loan with a mortgage banker or broker who reviews their income, debt, assets and credit report. Ultimately, the more debt you have the less you will be able to borrow.

Mitchell S. Feldman
Associate Broker/ Director of Sales
Madison Estates & Properties, Inc.
Office: (718) 645-1665/ Cell: (917) 805-0783
0 votes Thank Flag Link Tue Mar 12, 2013
Hello, most buyers have debt when applying for an FHA loan or any loan. It just depends on they type of debt you have, how much it effected your credit score and how much it effects your monthly income.

If you have alot of judgments, many late payments, you're a co-signer on another property or you own another property with a substantial mortgage still owed, IRS debt, hefty student loans that you're currently paying or due to pay soon and big car payments then you may have qualification issues.

Now all of the things above can effect your credit and qualification for a loan, but before you try to decide on your own whether you qualify or not, simply speak to a professional mortgage lender or two. They will go over your entire financial profile, help you pay off debts and boost your score quickly if possible in order to see if you can meet the loan requirements.
0 votes Thank Flag Link Tue Mar 12, 2013
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