Math Calculation FHA Mortgage Loans Flashcards
FHA requirements currently allow up to 31% for (HER) Housing Expense ratio and u p to 43% for (TOR) Total Obligations ratio
Example : A prospective borrower is applying for an FHA-insured Loan. The borrowers gross monthly income is $3,500. The borrowers projected monthly PITI is $900, the MIP is $150, and based on the credit report, the borrower has the following long term obligations:
Car payment $200 and Student Loan $150.00
A. What is the borrowers housing expenses ratio?
B. What is the borrowers total obligations ratio?
C. Does the borrower qualify for an FHA Mortgage?
A. To determine the borrowers HER , determine the total monthly house expenses
$900 PITI +$150 MIP = 1,050 total monthly house expense
Next divide the total monthly expenses by the monthly gross income
$1050/ 3500 = 0.30 or 30% HER
B. To determine the borrowers TOR, determine the total monthly obligations PITI +MIP+LTO = 900 PITI + $150 MIP +200 car $150 loan =$1400
Next divide the total monthly obligations by the monthly gross income
$1400 /3500 = .40 or 40%
C. To qualify for FHA insured Mortgage loans, the borrower must have an HER that does not exceed 31 %. The borrower HER is 30% so 30%of the borrowers monthly gross income pays the borrowers monthly housing expenses. The borrowers HER is below the required threshold. To qualify for the FHA insured mortgage loan, the borrowers TOR must not exceed 43%. The borrowers TOR is 40% which is less than the required threshold of 43%.
