What is the maximum total debt to income ratio for borrowers with an FHA loan absent any compensating factors?

The correct answer is 43%. For borrowers seeking an FHA loan, the Federal Housing Administration typically allows a maximum total debt-to-income (DTI) ratio of 43% when there are no compensating factors provided. This means that all of a borrower's monthly debt obligations—such as housing expenses (like mortgage payments) and other long-term debts (like car loans or student loans)—should not exceed 43% of their gross monthly income. This guideline is crucial for lenders to assess the borrower's ability to manage debt responsibly.

Compensating factors, such as a significant amount of savings, a high credit score, or a larger down payment, could allow for the acceptance of a higher DTI ratio in some cases, but the standard ceiling for an FHA loan without these mitigating circumstances remains at 43%. Understanding this guideline helps both borrowers and lenders gauge qualification criteria effectively.