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The debt-to-income ratio is a calculation that your lender will use to determine the amount of your monthly financial obligations compared to the amount of income you have. The debt-to-income ratio is an important tool for the lender.

The more income you have compared to outgoing payments every month the better, your lender needs to justify you as a good credit risk. So how do borrowers with a lot of debt deal with this problem?

This is an important factor because if the ratio is too high yor lender can’t justify the loan. Borrowers should learn what the FHA considers to be “debt” and what things are not automatically counted as part of your debt ratio in order to view their finances the way the lender will.

FHA Home Loans And Debt Ratios

Some debt isn’t counted as such for the purpose of calculating the debt-to-income ratio under the rules found in HUD 4000.1. What financial obligations are not counted?

According to HUD 4000.1, the FHA Lender’s Handbook for the FHA Single Family Home Loan program, the following is not counted as debt:

• Medical collections
• Federal, state, and local taxes, if not delinquent and no payments are required
• Automatic deductions from savings, when not associated with another type of obligation
• Federal Insurance Contributions Act and other retirement, such as 401(k) accounts
• Collateralized loans secured by depository accounts
• Utilities
• Child care
• Commuting costs
• Union dues
• Insurance, other than property insurance
  Open accounts with zero balances
• Voluntary deductions, when not associated with another type of obligation