Debt/Income Ratio
The 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 various other monthly debt payments.
How to figure your qualifying ratio
Usually, underwriting for conventional mortgage loans requires a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.
The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be applied to housing (this includes principal and interest, private mortgage insurance, hazard insurance, taxes, and homeowners' association dues).
The second number is what percent of your gross income every month that should be spent on housing costs and recurring debt together. Recurring debt includes credit card payments, car loans, child support, and the like.
Examples:
28/36 (Conventional)
- Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
- Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
- Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses
If you'd like to calculate pre-qualification numbers on your own income and expenses, please use this Mortgage Qualification Calculator.
Just Guidelines
Remember these are just guidelines. We'd be thrilled to go over pre-qualification to help you determine how large a mortgage loan you can afford.
At Sky Apply Mortgage, Inc, we answer questions about qualifying all the time. Give us a call: 8132007931.