Debt Ratios for Home Financing
Lenders use a ratio called "debt to income" to decide the most you can pay monthly after your other recurring debts are paid.
About your qualifying ratio
In general, underwriting for conventional mortgage loans requires a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.
The first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything that makes up the payment.
The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing costs and recurring debt. Recurring debt includes things like auto payments, child support and credit card payments.
For example:
A 28/36 qualifying ratio
- Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
- Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
- Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses
If you'd like to run your own numbers, we offer a Mortgage Loan Pre-Qualification Calculator.
Guidelines Only
Remember these are just guidelines. We'd be happy to pre-qualify you to determine how large a mortgage loan you can afford.
Sky Apply Mortgage, Inc can answer questions about these ratios and many others. Call us: 8132007931.