Ratio of Debt to Income
Your debt to income ratio is a tool lenders use to calculate how much of your income is available for a monthly home loan payment after all your other recurring debts are fulfilled.
How to figure your qualifying ratio
In general, underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.
The first number is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything that makes up the full payment.
The second number is the maximum percentage of your gross monthly income which can be applied to housing costs and recurring debt. Recurring debt includes car loans, child support and credit card payments.
Some example data:
With a 28/36 ratio
- 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 run your own numbers, we offer a Loan Qualifying Calculator.
Remember these are just guidelines. We will be happy to help you pre-qualify to help you figure out how large a mortgage loan you can afford.
Sky Apply Mortgage, Inc can walk you through the pitfalls of getting a mortgage. Call us: (813) 200-7931.
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