I'm not that conversant with ratios, so I'll let the loan pros speak to those particulars. However, I'd make a couple of points, and pose a potentially problematic question? First, your credit score is only going to gain to you 1/8th point or so regarding loan rate -- FHA rates are pretty much the same for everyone, and a function of the current loan market. You'll get whatever's current. Second, if the $8,000 tax credit/refund is a deal-breaker for you, you probably can't afford to buy. Trust me -- $8,000 doesn't go that far unless you find a house you need to do NOTHING to, including furnish! And, finally -- does your reticence about 2007 income indicate your current job history is less than two years? If so, know that most lenders seek two years as a minimum for stable employment history. If your current employment is in the same field as your academic pursuits, that would help. You can overcome some of these factors/difficulties with offsetting benefits, such as substantial reserves/savings.