Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other monthly debts are paid.
How to figure your qualifying ratio
For the most part, conventional mortgages need a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.
For these ratios, 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.
The second number is the maximum percentage of your gross monthly income that should be spent on housing costs and recurring debt together. Recurring debt includes vehicle payments, child support and credit card payments.
- Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
- Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
- Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses
If you want to run your own numbers, we offer a Mortgage Loan Qualifying Calculator.
Don't forget these are just guidelines. We'd be thrilled to pre-qualify you to determine how much you can afford.
Sky Apply Mortgage, Inc can answer questions about these ratios and many others. Give us a call at (813) 200-7931.
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