Debt/Income Ratio
Your ratio of debt to income is a formula lenders use to calculate how much of your income can be used for a monthly home loan payment after all your other recurring debt obligations have been met.
Understanding your qualifying ratio
Most underwriting for conventional mortgages needs a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.
The first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything that makes up the full payment.
The second number is what percent of your gross income every month that can be applied to housing expenses and recurring debt. For purposes of this ratio, debt includes payments on credit cards, vehicle loans, child support, and the like.
For example:
With a 28/36 qualifying 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'd like to run your own numbers, we offer a Mortgage Qualification Calculator.
Just Guidelines
Don't forget these ratios are just guidelines. We will be happy to help you pre-qualify to help you figure out how much you can afford.
CHASE MORTGAGE, Inc. #317430 can walk you through the pitfalls of getting a mortgage. Give us a call: 4357556622.