Debt/Income Ratio
The ratio of debt to income is a formula lenders use to calculate how much of your income can be used for your monthly home loan payment after you meet your various other monthly debt payments.
How to figure the qualifying ratio
Most conventional mortgages need a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.
In these ratios, the first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that makes up the full payment.
The second number in the ratio is what percent of your gross income every month that can be applied to housing expenses and recurring debt. Recurring debt includes things like auto payments, child support and credit card payments.
For example:
28/36 (Conventional)
- Gross monthly income of $2,700 x .28 = $756 can be applied to housing
- Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $2,700 x .29 = $783 can be applied to housing
- Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses
If you'd like to calculate pre-qualification numbers with your own financial data, feel free to use our Mortgage Loan Qualification Calculator.
Just Guidelines
Don't forget these are just guidelines. We'd be happy to pre-qualify you to help you figure out how much you can afford.
At Americn Hero Mortgage, we answer questions about qualifying all the time. Give us a call: 754-202-4376.