Ratio of Debt-to-Income
Lenders use a ratio called "debt to income" to determine the most you can pay monthly after your other monthly debts are paid.
How to figure your qualifying ratio
Most conventional mortgages require a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.
The first number is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything.
The second number in the ratio is what percent of your gross income every month which can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, auto/boat payments, child support, and the like.
- Gross monthly income of $3,500 x .28 = $980 can be applied to housing
- Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
- Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses
If you want to calculate pre-qualification numbers on your own income and expenses, feel free to use our very useful Mortgage Pre-Qualification Calculator.
Remember these are just guidelines. We will be happy to go over pre-qualification to help you figure out how large a mortgage loan you can afford.
At Trustin Mortgage, LLC, we answer questions about qualifying all the time. Call us at (302) 765-8089.
Get the Best Mortgage Rate! Tell us a little about your current needs and we can use that information to match you with just the right loan.