Debt to Income Ratio
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 you have met your other monthly debt payments.
About your qualifying ratio
In general, conventional mortgage loans require a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.
The first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything.
The second number in the ratio is the maximum percentage of your gross monthly income which can be spent on housing expenses and recurring debt. Recurring debt includes things like car loans, child support and monthly credit card payments.
Examples:
28/36 (Conventional)
- 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, use this Mortgage Qualification Calculator.
Just Guidelines
Remember these are just guidelines. We will be happy to help you pre-qualify to determine how large a mortgage you can afford.
Triumph Mortgage Inc can walk you through the pitfalls of getting a mortgage. Call us at 8327302000.