It sure is a bumpy ride, considering the variety of financing options offered to married couples. Of the large variety of mortgage options out there, FHA loans are the most popular because they are more lenient in qualification.

However, when it comes to married couples, the Federal Housing Administration (FHA) has specific requirements that can influence the application process, approval, and loan terms.

This post will unpack the key elements of FHA loan eligibility for married couples, aiming to offer clear insights and guidance to support you in making well-informed choices on your shared path to homeownership.

FHA requirements for married couples

When married couples embark on the journey of securing an FHA loan, they must navigate a series of specific requirements that can significantly impact their eligibility and the terms of their loan.

Credit Scores and Debt-to-Income Ratios (DTI)

For married couples applying for an FHA loan, credit reports for both applicants will be reviewed. Lenders will examine the credit history and DTI (debt-to-income ratio) of both individuals to assess their ability to repay the loan.

It’s the lower median credit score between the two that determines eligibility. This means if one partner has a significantly lower score, it could affect the terms of the loan, including interest rates.

The DTI ratio, which measures your monthly debt payments against your income, is equally critical. A lower DTI ratio is preferable, as it indicates to lenders that you’re less of a financial risk.

For example:

Let’s say we have a married couple, Alexis and Brian, applying for an FHA loan. Alexis has a credit score of 680, while Brian’s credit score is 620. When applying for an FHA loan, the lender will look at both credit scores to determine eligibility.

In this scenario, because FHA loans require using the lower median credit score of the two applicants to assess eligibility, Brian’s credit score of 620 becomes the determining factor.

This means the terms of the loan, including the interest rate, will be based on a credit score of 620, despite Alexis having a higher score.

Note

Both couples must have a qualifying credit score to be on the loan. The FHA minimum credit score requirement is 580 with a 3.5% down payment. If scores are between 500 – 579 the down payment increases to 10%.

Related article: How to fix your credit score

how does the debt to income ratio work with married couples?

The Debt-to-Income (DTI) ratio is a key metric lenders use to determine an applicant’s ability to manage monthly payments and repay debts.

For married couples applying for an FHA loan, the DTI ratio calculation takes into account the combined debt and income of both partners to provide the overall picture of finances.

Here’s how it works:

Combining Income: The lender will combine the gross monthly income for both partners. This total income figure reflects the household’s overall earning power, which is used to assess their capacity to take on and manage mortgage payments.

Consolidating Debts: Next, all monthly debt obligations of both partners are combined. This includes car loans, student loans, credit card payments, and any other recurring debts.

Note

Even if only one partner is applying for the loan in a community property state, the debts of both will still be considered in the DTI calculation.

Calculating DTI Ratios: The lender calculates two key DTI ratios:

Front-End Ratio: This is the percentage of your total monthly income that goes toward housing costs, including the prospective mortgage payment, property taxes, homeowner’s insurance, and homeowners association (HOA) fees, if applicable.
Back-End Ratio: This ratio represents the percentage of your total monthly income that is used to cover all debt obligations, including the estimated mortgage payment and other debts mentioned above.

For FHA loans, the preferred maximum front-end DTI ratio is usually around 31%, and the back-end DTI ratio is typically capped at 43%. However, some borrowers may qualify for a higher ratio with strong compensating factors, such as an excellent credit score, current housing payment is similar to new mortgage payment, money in savings.

You can read more about the compensating factors on HUD’s guide.

DTI Example:

Let’s say Alexis and Brian have a combined gross monthly income of $8,000.

Their combined monthly debts, including car payments, student loans, and credit card bills, amount to $2,000.

Their estimated monthly mortgage payment, including taxes and insurance, is projected to be $1,500.

Front-End Ratio: $1,500 (mortgage) / $8,000 (income) = 18.75%
Back-End Ratio: ($2,000 (other debts) + $1,500 (mortgage)) / $8,000 (income) = 43.75%

In this scenario, while their front-end ratio is well below the FHA threshold, their back-end ratio slightly exceeds the typical 43% cap.

Depending on the lender and other factors, they might still qualify for the loan, but they might need to present additional qualifications or consider reducing their debt before applying.

FHA DTI ratio requirements for married couples in community property states

In a community property state, the debts of both spouses are considered joint, even if only one partner is applying for the loan.

This means that when calculating the Debt-to-Income (DTI) ratio for an FHA loan, lenders will take into account the debts of the non-borrowing spouse along with the income and debts of the borrowing spouse.

Example Scenario:

Let’s consider Brian, who is applying for an FHA loan, and Alexis, Brian’s spouse, who will not be on the loan.

They live in a community property state. Brian has a gross monthly income of $5,000, and Alexis has a gross monthly income of $4,000.

However, since Alexis is not a co-applicant on the loan, only Brians’s income is considered for qualifying purposes.

Still, Alexis’s debts must be included in the DTI calculation due to state law.

Brian’s Income: $5,000/month
Brian’s Monthly Debts: $600 (car loan) + $200 (credit card payments) = $800
Alexis’s Monthly Debts: $400 (student loans) + $300 (car loan) = $700

Calculating the DTI Ratio:

Income for DTI Calculation: Since Alexis is not on the loan, only Brian’s income of $5,000 is used.
Total Monthly Debts: The debts of both Brian and Alexis are combined for the DTI calculation: $800 (Brian’s debts) + $700 (Alexis’s debts) = $1,500.
Estimated Monthly Mortgage Payment: Let’s assume the mortgage payment, including taxes and insurance, is projected to be $1,200.

Now, let’s calculate the DTI ratios:

Front-End Ratio: The mortgage payment of $1,200 divided by Brian’s monthly income of $5,000 equals a front-end ratio of 24%.
Back-End Ratio: The total monthly debts ($1,500) plus the mortgage payment ($1,200), totaling $2,700, divided by Brian’s monthly income ($5,000), results in a back-end ratio of 54%.

In this example, the inclusion of Alexis’s debts in the DTI calculation increases Brian’s back-end ratio significantly to 54%. This ratio is considered high for an FHA loan.

If the back-end ratio exceeds the FHA’s preferred maximum (typically around 43%), it could impact Brian’s ability to qualify for the loan, requiring them to look for ways to reduce debt or find other compensating factors to strengthen their application.

Alternative loan option for married couples

When a married couple faces challenges with high DTI ratios due to a non-borrowing spouse’s debt in a community property state, and this impacts their ability to qualify for an FHA loan, there is another financing option.

3% Conventional Financing