Debt Ratios for Home Lending
Lenders use a ratio called "debt to income" to determine the most you can pay monthly after your other monthly debts have been paid.
About the qualifying ratio
For the most part, conventional loans need a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.
The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be spent on housing costs (including principal and interest, PMI, hazard insurance, taxes, and homeowners' association dues).
The second number in the ratio is the maximum percentage of your gross monthly income that should be applied to housing costs and recurring debt together. Recurring debt includes things like car loans, child support and credit card payments.
Examples:
With a 28/36 qualifying ratio
- Gross monthly income of $2,700 x .28 = $756 can be applied to housing
- Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $2,700 x .29 = $783 can be applied to housing
- Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses
If you want to calculate pre-qualification numbers with your own financial data, we offer a Loan Qualifying Calculator.
Guidelines Only
Don't forget these are only guidelines. We will be thrilled to help you pre-qualify to help you figure out how large a mortgage loan you can afford.
At Wize Mortgage LLC, we answer questions about qualifying all the time. Give us a call: .