Ratio of Debt to Income
Lenders use a ratio called "debt to income" to decide the most you can pay monthly after your other monthly debts have been paid.
Understanding your qualifying ratio
Most conventional mortgages need 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 be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that constitutes the full payment.
The second number is the maximum percentage of your gross monthly income that should be spent on housing expenses and recurring debt. For purposes of this ratio, debt includes credit card payments, auto/boat payments, child support, etcetera.
Some example data:
28/36 (Conventional)
- 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 want to calculate pre-qualification numbers on your own income and expenses, we offer a Loan Qualification Calculator.
Just Guidelines
Don't forget these are only guidelines. We'd be happy to go over pre-qualification to determine how large a mortgage loan you can afford.
Americn Hero Mortgage can answer questions about these ratios and many others. Give us a call at 754-202-4376.