Ratio of Debt to Income
Lenders use a ratio called "debt to income" to decide the most you can pay monthly after you've paid your other recurring debts.
How to figure your qualifying ratio
Typically, conventional loans require a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.
For these ratios, the first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything.
The second number is the maximum percentage of your gross monthly income that can be applied to housing expenses and recurring debt together. Recurring debt includes things like car loans, child support and monthly credit card payments.
Some example data:
With a 28/36 qualifying ratio
- 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 want to run your own numbers, feel free to use our superb Mortgage Loan Pre-Qualification Calculator.
Guidelines Only
Don't forget these are only guidelines. We will be thrilled to help you pre-qualify to help you determine how much you can afford.
Secure Mortgage Company can walk you through the pitfalls of getting a mortgage. Call us: (713) 667-5472.