Ratio of Debt-to-Income
|
|
|
Shopping for a mortgage? We can help! Call us at (404) 740-9992. Want to get started? Apply Now.
|
|
|
|
|
Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you have paid your other recurring loans.
Understanding the qualifying ratio
Most conventional mortgage loans 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.
For these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing costs. 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 can be spent on housing expenses and recurring debt. Recurring debt includes payments on credit cards, car loans, child support, et cetera.
For example:
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'd like to calculate pre-qualification numbers with your own financial data, we offer a Loan Qualification Calculator.
Guidelines Only
Don't forget these ratios are only guidelines. We'd be thrilled to help you pre-qualify to determine how large a mortgage you can afford.
At Multiple Lending Solution, Inc., we answer questions about qualifying all the time. Call us at (404) 740-9992.