Debt Ratios for Residential Financing
The debt to income ratio is a tool lenders use to calculate how much money is available for a monthly mortgage payment after you meet your various other monthly debt payments.
About the qualifying ratio
In general, conventional mortgages need a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.
The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be spent on housing costs (including loan principal and interest, PMI, homeowner's insurance, property taxes, and homeowners' association dues).
The second number is what percent of your gross income every month that should be applied to housing expenses and recurring debt. Recurring debt includes things like vehicle payments, child support and monthly credit card payments.
Some example data:
28/36 (Conventional)
- Gross monthly income of $2,700 x .28 = $756 can be applied to housing
- Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $2,700 x .29 = $783 can be applied to housing
- Gross monthly income of $2,700 x .41 = $1,107 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 Loan Pre-Qualification Calculator.
Guidelines Only
Remember these ratios are just guidelines. We'd be thrilled to pre-qualify you to help you figure out how large a mortgage loan you can afford.
La Paz Mortgage can walk you through the pitfalls of getting a mortgage. Call us: 9497706067.