Ratio of Debt to Income
Your debt to income ratio is a tool lenders use to calculate how much money can be used for a monthly mortgage payment after all your other recurring debts are fulfilled.
About the qualifying ratio
In general, conventional loans require 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 applied to housing (including mortgage principal and interest, private mortgage insurance, homeowner's insurance, 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. Recurring debt includes credit card payments, auto/boat loans, child support, and the like.
Examples:
With a 28/36 qualifying ratio
- 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, feel free to use our Mortgage Loan Qualifying Calculator.
Just Guidelines
Remember these ratios are just guidelines. We'd be happy to pre-qualify you to help you figure out how large a mortgage you can afford.
Amity Mortgage LLC can walk you through the pitfalls of getting a mortgage. Give us a call at 2037296681.