Debt Ratios for Home Lending
Your ratio of debt to income is a formula lenders use to calculate how much of your income can be used for your monthly mortgage payment after you meet your various other monthly debt payments.
How to figure your qualifying ratio
For the most part, 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.
The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can go to housing (this includes mortgage principal and interest, PMI, homeowner's insurance, property tax, and homeowners' association dues).
The second number is the maximum percentage of your gross monthly income that should be spent on housing costs and recurring debt. Recurring debt includes things like vehicle payments, child support and monthly credit card payments.
For example:
A 28/36 qualifying ratio
- 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, we offer a Mortgage Loan Qualification Calculator.
Guidelines Only
Remember these are just guidelines. We will be happy to go over pre-qualification to help you figure out how large a mortgage loan you can afford.
Foxfield Financial can walk you through the pitfalls of getting a mortgage. Give us a call: 7205988300.