Ratio of Debt-to-Income
The debt to income ratio is a tool lenders use to calculate how much of your income can be used for your monthly mortgage payment after all your other monthly debt obligations have been fulfilled.
About your qualifying ratio
Typically, conventional mortgage 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 (this includes principal and interest, private mortgage insurance, homeowner's insurance, taxes, and HOA dues).
The second number is what percent of your gross income every month that should be spent on housing costs and recurring debt together. Recurring debt includes vehicle loans, child support and credit card payments.
Examples:
With a 28/36 ratio
- Gross monthly income of $3,500 x .28 = $980 can be applied to housing
- Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
- Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses
If you'd like to calculate pre-qualification numbers with your own financial data, we offer a Loan Qualification Calculator.
Guidelines Only
Remember these ratios are only guidelines. We'd be thrilled to help you pre-qualify to help you determine how much you can afford.
At Wize Mortgage LLC, we answer questions about qualifying all the time. Give us a call at .