Mortgage Q&A:

What is the debt to income ratio that I need to keep in mind when looking for a house?

There are basically two debt to income ratios that are important in the qualification for a mortgage. They are referred to as front end ratio and back end ratio. The front end ratio takes the principal, interest, taxes and insurance that you will pay on your monthly mortgage and divides that into your monthly gross income (for self-employed borrowers, net income is used). The back end ratio takes the items mentioned in the front end ratio and adds all your other mortgages and revolving monthly debt that you owe and divides that into your monthly income. Different banks are more exacting than others on ratios, therefore you should check with your mortgage professional to ensure your specific loan program is evaluated correctly with respect to what ratios are being used.

Are there any programs that allow additional money in the mortgage for refurbishing the home I am buying or refinancing?

Yes, specifically there is a program offered by HUD. The FHA program is called the Streamlined 203(k). FHA’s Streamlined 203(k) program permits homebuyers to finance up to an additional $35,000 into their mortgage to improve or upgrade their home before move-in. With this new product, homebuyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser.