Ratio of Debt-to-Income
Lenders use a ratio called "debt to income" to determine the most you can pay monthly after you've paid your other monthly debts.
How to figure the qualifying ratio
In general, underwriting for conventional mortgage loans requires a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.
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, PMI - everything that constitutes the payment.
The second number is what percent of your gross income every month that should be spent on housing costs and recurring debt. Recurring debt includes credit card payments, car loans, child support, and the like.
Some example data:
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 Pre-Qualification Calculator.
Remember these ratios are only guidelines. We will be happy to pre-qualify you to determine how large a mortgage you can afford.
Queen City Mortgage Company, LLC can walk you through the pitfalls of getting a mortgage. Give us a call: 5137966020.