Which of the following factors is primarily used to determine a borrower's eligibility for an FHA loan?

The primary factor used to determine a borrower's eligibility for an FHA loan is the debt-to-income ratio (DTI). This metric assesses the percentage of a borrower’s gross monthly income that goes toward paying their monthly debts. For FHA loans, lenders typically look for a DTI ratio that does not exceed certain thresholds; generally, a DTI of 31% or less for housing expenses and 43% for total debt is favorable. This ensures that the borrower has adequate income to manage their monthly obligations, including the FHA mortgage payment.

While credit score, employment history, and property value are also important considerations in the underwriting process, the DTI ratio is crucial because it provides a clear picture of a borrower’s financial stability and ability to make consistent mortgage payments. Thus, it serves as a primary determining factor for FHA loan eligibility, reflecting the program's focus on assisting borrowers with limited financial resources or lower credit scores.