Debt Ratios for Home Lending
Lenders use a ratio called "debt to income" to decide your maximum monthly payment after you've paid your other recurring loans.
How to figure the qualifying ratio
Typically, underwriting for conventional mortgages requires a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.
The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can go to housing (including mortgage principal and interest, PMI, hazard insurance, property taxes, and HOA dues).
The second number in the ratio is what percent of your gross income every month which can be applied to housing costs and recurring debt together. Recurring debt includes things like auto/boat loans, child support and monthly credit card payments.
Examples:
A 28/36 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 Pre-Qualifying Calculator.
Just Guidelines
Don't forget these are just guidelines. We'd be thrilled to help you pre-qualify to help you figure out how large a mortgage you can afford.
At Bright Vision Mortgage, we answer questions about qualifying all the time. Give us a call: (904) 342-3622.