A single compensating factor and two compensating factors unlock different ratio ceilings on a manual FHA underwrite. One of the factors only works in combination, and one works entirely on its own at a tier nobody talks about. Here is the ladder.
These apply at a minimum decision credit score of 580 and above. Below 580, or with no credit score, a manual file is capped at 31/43 and no factor raises it.
The baseline manual ceiling. Energy Efficient Homes may stretch to 33/45.
Any one of: verified cash reserves, a minimal increase in housing payment, or residual income.
A tier of its own. No second factor, but a strict credit-profile test.
Two of: reserves, minimal payment increase, significant additional income, or residual income.
This one is unusual because it trades a lower back-end limit (40 rather than 47 or 50) for needing no other factor. It applies only when all three are true:
Your housing payment is the only open account with an outstanding balance that is not paid off monthly.
Credit lines in your own name, open for at least six months.
You can document those accounts have been paid off in full every month for at least the past six months.
Two exclusions catch people. Accounts where you are only an authorized user do not qualify, and someone with no credit other than their housing payment does not qualify either. The factor rewards disciplined use of credit, not the absence of it.
Overtime, bonuses, part-time or seasonal income that was left out of your qualifying income can count as a compensating factor - but only in combination with another factor, and only to reach 40/50. It cannot be your first factor.
It also has conditions of its own: the lender must document at least one year of receiving it and that it is likely to continue, and the income, if it were added to your qualifying income, must be enough to bring your ratios down to 37/47 or lower. Income from a non-borrowing spouse or anyone not obligated on the mortgage does not count here.
The individual rules for the two most-used factors are on cash reserves and minimal payment increase. Residual income, which FHA borrows straight from VA's tables, is explained in full on our VA residual income guide.
Source: HUD Handbook 4000.1, II.A.5.d.viii Approvable Ratio Requirements and II.A.5.d.ix Documenting Acceptable Compensating Factors (Manual), last revised 11/26/2025. Read the section in full before relying on it; FHA policy is set by HUD and changes. Not a commitment to lend.
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