What is the FHA qualifying ratio for home payment to gross monthly income?

The correct answer indicates that the FHA qualifying ratio for home payment to gross monthly income is set at 31%. This ratio is a critical guideline used by lenders to determine the maximum allowable percentage of a borrower's income that can be allocated toward housing expenses.

When calculating this ratio, the FHA considers the borrower's total monthly housing costs, which typically include the mortgage payment (principal and interest), property taxes, homeowners insurance, and sometimes mortgage insurance premiums. Setting the ratio at 31% allows for a manageable level of housing costs relative to income, helping to ensure that borrowers do not become financially overextended.

In the context of practical application, this means that if a borrower earns a gross monthly income of $5,000, their maximum allowable monthly housing cost would be approximately $1,550 (which is 31% of $5,000). This guideline is essential for maintaining borrower affordability and helping ensure that those purchasing a home through FHA financing have reasonable expectations for their monthly payments based on their income levels.