Ratio of Debt to Income
Your debt to income ratio is a formula lenders use to determine how much of your income can be used for your monthly mortgage payment after you meet your other monthly debt payments.
About your qualifying ratio
Typically, underwriting for conventional loans needs a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.
The first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything.
The second number in the ratio is the maximum percentage of your gross monthly income which can be spent on housing expenses and recurring debt. Recurring debt includes things like auto payments, child support and monthly credit card payments.
For example:
With a 28/36 ratio
- Gross monthly income of $3,500 x .28 = $980 can be applied to housing
- Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
- Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses
If you'd like to run your own numbers, use this Mortgage Loan Qualification Calculator.
Guidelines Only
Remember these are only guidelines. We will be happy to pre-qualify you to determine how much you can afford.
At MortgageZ LLC, we answer questions about qualifying all the time. Call us: 8557558700.