Ratio of Debt to Income
The ratio of debt to income is a tool lenders use to calculate how much money is available for a monthly home loan payment after you meet your various other monthly debt payments.
About your qualifying ratio
Typically, underwriting for conventional loans needs a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.
The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be applied to housing costs (including loan principal and interest, private mortgage insurance, homeowner's insurance, property tax, and HOA dues).
The second number in the ratio is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt. Recurring debt includes things like auto payments, 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 want to calculate pre-qualification numbers on your own income and expenses, use this Mortgage Pre-Qualifying Calculator.
Guidelines Only
Don't forget these are only guidelines. We'd be thrilled to help you pre-qualify to help you determine how large a mortgage loan you can afford.
Metro Mortgage can answer questions about these ratios and many others. Give us a call at 866-300-1550.