Debt/Income Ratio
Lenders use a ratio called "debt to income" to determine the most you can pay monthly after you have paid your other recurring debts.
About your qualifying ratio
Most underwriting for conventional mortgages needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying 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 (including loan principal and interest, private mortgage insurance, hazard insurance, property tax, and HOA dues).
The second number is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt. Recurring debt includes auto loans, child support and monthly credit card payments.
Examples:
With 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 want to run your own numbers, feel free to use our Mortgage Loan Qualification Calculator.
Guidelines Only
Don't forget these are only guidelines. We will be thrilled to pre-qualify you to help you determine how large a mortgage loan you can afford.
CHASE MORTGAGE, Inc. #317430 can walk you through the pitfalls of getting a mortgage. Call us at 4357556622.