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Your ratio of debt to income is a formula lenders use to determine how much of your income can be used for a monthly home loan payment after you have met your other monthly debt payments.
About your qualifying ratio
In general, 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) ratio.
The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be applied to housing (including loan principal and interest, PMI, homeowner's insurance, property taxes, and HOA dues).
The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto payments, child support, et cetera.
Some example data:
- 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'd like to run your own numbers, feel free to use our superb Mortgage Qualification Calculator.
Remember these are just guidelines. We will be happy to go over pre-qualification to determine how much you can afford.Diamante Mortgage can answer questions about these ratios and many others. Give us a call at .
you can afford.
At Diamante Mortgage, we answer questions about qualifying all the time. Give us a call: 800-805-7088.