Ratio of Debt-to-Income
Lenders use a ratio called "debt to income" to decide your maximum monthly payment after your other monthly debts are paid.
How to figure your qualifying ratio
In general, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.
The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be spent on housing (this includes mortgage principal and interest, private mortgage insurance, hazard insurance, property tax, and homeowners' association dues).
The second number is what percent of your gross income every month that can be spent on housing expenses and recurring debt. For purposes of this ratio, debt includes credit card payments, auto loans, child support, and the like.
Some example data:
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 on your own income and expenses, feel free to use our Mortgage Loan Pre-Qualification Calculator.
Guidelines Only
Remember these are only guidelines. We'd be happy to help you pre-qualify to help you determine how large a mortgage you can afford.
At Sky Apply Mortgage, Inc, we answer questions about qualifying all the time. Call us: 8132007931.