Final answer:
Mary can lower her debt-to-income ratio by paying off debts, increasing her income, choosing a cheaper home, and saving for a larger down payment to qualify for an FHA loan. She can also provide proof of a stable employment history, timely bill payments, and potentially find a co-signer.
Step-by-step explanation:
If Mary's debt-to-income ratio is too high for FHA standards, there are several steps she could take to qualify for an FHA loan:
- Reduce existing debt by paying off loans or credit card balances to lower her debt-to-income ratio.
- Increase her income by seeking higher-paying employment or taking on additional part-time work.
- Choose a less expensive home to reduce the amount she needs to borrow.
- Save for a larger down payment, which could improve her loan terms and ratio.
The FHA program was instrumental in increasing homeownership and helping families not otherwise eligible for homeownership, despite some historical issues with discriminatory practices like redlining. FHA loans offer low down payment options as low as 3.5%, but also often require mortgage insurance.
To reassure a bank about her ability to repay the loan, Mary can also:
- Provide a stable employment history and any additional sources of income.
- Present a record of timely bill payments and financial responsibility.
- Possibly consider finding a co-signer with better credit or lower debt.