What are the housing payment and total debt ratios for standard FHA financing as a percentage of gross monthly income?

For standard FHA financing, the housing payment ratio, often referred to as the front-end ratio, is set at 31% of gross monthly income. This ratio assesses what portion of a borrower's income goes toward housing expenses, which typically include the mortgage payment, property taxes, homeowners insurance, and mortgage insurance premiums.

The total debt ratio, known as the back-end ratio, is capped at 43% of gross monthly income. This ratio measures what portion of a borrower's income is used for all debt obligations, including housing expenses and any other debt such as car loans, credit card payments, and personal loans.

These ratios are critical for determining borrowing eligibility and ensuring that the borrower has sufficient income to manage both housing costs and other financial obligations without becoming overburdened. FHA loans are designed to help individuals and families achieve homeownership, particularly those with lower income or less-than-perfect credit. The 31%/43% guidelines help strike a balance between affordability and risk for lenders while promoting responsible borrowing practices.