Debt-to-Income Ratio
Lenders use a ratio called "debt to income" to decide the most you can pay monthly after your other recurring debts have been paid.
How to figure your qualifying ratio
In general, conventional mortgage loans require 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 be applied to housing (including mortgage principal and interest, private mortgage insurance, hazard insurance, property tax, and HOA dues).
The second number in the ratio is what percent of your gross income every month that should be spent on housing costs and recurring debt. Recurring debt includes things like car payments, child support and credit card payments.
For example:
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'd like to run your own numbers, we offer a Mortgage Qualification Calculator.
Just Guidelines
Don't forget these are just guidelines. We'd be thrilled to go over pre-qualification to help you determine how much you can afford.
Price Mortgage Group LLC can walk you through the pitfalls of getting a mortgage. Call us: 405-513-7700.