How Much Loan & Home Do I Qualify For With An FHA Loan? (2020)


Hey, this is Chris Trapani the mortgage pro.
You know people ask me all the time with an FHA loan, Chris how much loan can I qualify
How much can I borrow?
Well, it depends on a number of factors.
And I’m going to go over a whole bunch of them right now.
Ok were gonna start with Debt to Income Ratio.
Here’s how it works.
There’s 2 debt to income ratios that we have to worry about on an FHA loan.
The first one is the payment.
We call it the front end.
It’s the first.
So the payment can be no more than 47% of your total income.
So for even numbers purposes and just to make it easier to calculate let’s say you make
$10,000 a month.
That means that 47% up to $4,700 can be your house payment.
Now we have a back-end ratio that’s also the total house payment when I say total house
payment what I’m referring to here is Principle Interest Taxes Insurance and if you’re in
a condominium or association you’re paying an association fee that has to be included
47% now we’re going to look at the back end.
take that 47% that full payment that you have and now we’re going to add your car payments
student loans credit cards child support alimony any of these types of things, that as a total
can’t be more than 57% of your total income.
Alright, now we need to calculate your income.
Everything we’re going to talk about is before taxes are taken out when it comes to a job.
There are a few tricks and a few tips we’re going to talk about with other things for
perhaps tax-free income but assuming you make $5,000 a month as a salary that’s it there’s
no calculation necessary but most people actually don’t get paid that way.
Most people get paid hourly, let’s say you make $20 an hour – we’re going to calculate
do you work 40 hours a week or do you work 37.2 hours a week?
Because a lot of people do that, they don’t work the full 40 hours and some people work
60 hours a week so we’re going to have to calculate overtime.
But, let’s just assume you’re working 40 hours a week to start.
We start there, we’re going to take $20 an hour we’ll say, at 40 hours.
That’s $800 a week.
Now a lot of people are going to say $800 times 4 – 4 paychecks a month it actually
doesn’t work that way.
Because 4 times a year you’re going to get an extra paycheck.
so here’s how it’s going to work.
You’re going to take that $800 muliply it by 52 weeks and divide it by 12 and that’s
the actual income.
So, we’re going to show you some formulas and we’re going to work with that, but I’m
going to teach you a little trick here that nobody seems to know.
Take your hourly salary if it $20 an hour and if your work 40 hours a week just multiply
it by 173.333 you get the same exact number.
For all you mortgae professionals and real estate professionals out there, I just taught
you something.
A lot of people who work hourly also work overtime.
How it works is we’re going to take a 2 year average of your overtime.
And a lot of people say I don’t know exactly how much I make overtime it changes from week
to week and month to month.
Well here’s what happens – we require a verification of employment we are going to send your business
– your company a form to be filled out it’s a standard form and it asks them, how much
did you make in 2016 for overtime, how much did you make in 2017 for overtime how much
have you made so far in 2018 for overtime and we’re going to average that out because
sometimes people go into a very busy season maybe come Christmas time or maybe the summertime
is super busy but you don’t work overtime in the beginning of the year.
This way we average it out so nobody gets shortchanged and we don’t give you too much
overtime and credit for that either.
We all like bonuses we’re going to average those too.
We’re going to average them over 2 years.
If you get a commission a lot of people, salespeople are their salaries and their income are commission
We’re going to take a look at 2 years commission and we are going to average it out.
That’s how we are going to figure out the gross.
Now that’s how we figure out your income it’s the same exact thing for your spouse.
And we’ll total the 2 together and then we’re going to start working with the 47% and 57%
debt ratios.
OK – i promised I would talk to you about tax free income.
What is tax free income?
Well there is a number of different things.
Child Suport is tax free income.
Sometimes people are foster parents and they get checks from the state or whatnot.
Veterans often receive income from disability that is tax free income some people receive
Social Security Disability or maybe even Social Security but they don’t have enough other
income to have to pay taxes on it.
We take this we understand because you don;t have to pay taxes it’s actually worth more.
So what we do is on an FHA loan we add 15% of it.
What does that mean?
If you get $1,000 a month tax free – I get to add 15% it looks like $1,150.
We’re going to add that to your income.
Now what else is super important to calculate how much home you can qualify for.
Well we’re look at your credit score.
Why your credit score?
Well if you have over a 580 FICO score we’re usually going to be able to go up to that
57% debt ratio and 47% front end.
Sometimes it requires a 620 it all depends on how well you’ve taken care of your credit
or not.
Not if you are below a 580 FICOscore we are going to be looking at a much lower debt ratio.
If we can’t get a standard approval by going to FNMA or Freddie Macs website we’re looking
at 41% or 43% debt ratio.depending on the circumstance.
So we have to look at things as a whole.
So don’t give up if your credit score is low – we can work with that we’ll figure that
out we’ll get you over the top to help you Fire Your Landlord but be have to work within
the confines of the government requirement that FHA puts on it.
Now what is the payment?
Well – we have to calculate it based on today’s interest rate.
The interest rate changes daily it goes up a fraction it goes down a fraction it changes
daily we have to look at your property taxes based on the purchase price we have to look
at your total payment how much is you homeowners insurance?
PMI – mortgage Insurance have to pay on an FHA loan it’s actually MIP we have to include
thosethings in the payment so we can figure it out.
Now it sounds like a really simple thing to do – it doesn’t take long – all we need is
a few documents from you – you can go to fill out the application takes you 5 to 10
minutes and I’ll figure it out exactly.
Right now I’m giving you this video so you have an estimate but we have to end the guessing
and start the knowing so we can Fire Your Landlord.
Sometimes people are just a little short on income and they say what do I do, do I have
to really downgrade my house that much?
Well, what about a non-occupying co-borrower.
What’s that?
Well maybe your brother sister cousin Charlie, mom dad they have good income with not a lot
of debt and what we do is we add their income on to yours.
Now, we obviously have to add their debt too – they are just as legally responsible as
you are for the loan but very often that can help you go over the top and buy your own
Hey thanks for watching the video I hope you enjoyed it and if you want to get started
today – stop procrastinating!
Either call me up 310-350-2546 of go to the website right here you’ll see it
Click on the apply now button, we’ll get you started we’re Going to Fire Your Landlord!