Debt/Income Ratio

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after you have paid your other monthly loans.

How to figure your qualifying ratio

For the most part, conventional mortgages need 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 amount (as a percentage) of your gross monthly income that can go to housing (including mortgage principal and interest, private mortgage insurance, homeowner's insurance, property tax, and HOA dues).

The second number in the ratio is what percent of your gross income every month which can be spent on housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, vehicle payments, child support, etcetera.

Examples:

28/36 (Conventional)

• 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 run your own numbers, we offer a Loan Pre-Qualifying Calculator.

Guidelines Only

Remember these are only guidelines. We will be happy to pre-qualify you to determine how much you can afford.

At CHASE MORTGAGE, Inc. #317430, we answer questions about qualifying all the time. Give us a call at 4357556622.