Debt/Income Ratio
Your 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
Most conventional 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 the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything that constitutes the payment.
The second number is the maximum percentage of your gross monthly income that should be applied to housing costs and recurring debt together. Recurring debt includes auto/boat loans, child support and monthly credit card payments.
Examples:
With a 28/36 ratio
- Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
- Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
- Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses
If you want to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Loan Pre-Qualification Calculator.
Don't forget these ratios are just guidelines. We will be thrilled to help you pre-qualify to help you figure out how large a mortgage loan you can afford.
Platinum Advantage Mortgage can answer questions about these ratios and many others. Give us a call: 407-341-4313. Want to get started?
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