How to Calculate FHA Loan Amounts

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An FHA loan is a mortgage based by the Federal Housing Administration to help borrowers qualify to purchase a home when they might not meet the stricter conventional mortgage standards. Because of the FHA backing, lenders will allow the monthly payment amount to be a slightly higher percentage of your monthly income. To calculate how much you may qualify for with an FHA loan, you need to know your monthly pretax income.

Multiply your monthly income by 0.29 to determine the maximum monthly payment based on your mortgage payment-to-income ratio; most lenders limit FHA mortgages to 29 percent of your monthly income. For example, if your monthly income equals $4,200, your maximum monthly payment would be $1,218.

Multiply your monthly income by 0.41 to determine the maximum amount your lender allows you to spend on debt payments. Debt payments include your mortgage payments in addition to student loans, auto loans and other outstanding installment payment loans. For example, if your monthly income equals $4,200, your monthly maximum for all debt payments would be $1,722.

Subtract your monthly debt obligations other than your monthly mortgage payment from the amount found in Step 2. For example, if you had a $210-per-month car loan and a $112-per-month student loan, you would subtract $322. Your maximum monthly payment would be $1,400.

Take the lesser of the amounts you arrived at in Step 1 and Step 3 as your maximum monthly payment. In this example, $1,218 is less than $1,400, so you would be able to take out a loan that had a monthly payment of up to $1,218.

Tips & Warnings

  • Your debt-to-income ratio is only one factor a lender will consider before issuing you an FHA loan. Just because you meet this criterion does not mean you will be approved for the loan.

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