Your ratio of debt to income is a tool lenders use to calculate how much money can be used for a monthly home loan payment after you have met your other monthly debt payments.
About your qualifying ratio
Typically, conventional loans need a qualifying ratio of 28/36. FHA loans are a little less strict, 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 costs (this includes loan principal and interest, PMI, homeowner's insurance, taxes, and HOA dues).
The second number is what percent of your gross income every month that should be spent on housing expenses and recurring debt. Recurring debt includes auto/boat loans, child support and credit card payments.
- 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 calculate pre-qualification numbers on your own income and expenses, please use this Mortgage Qualification Calculator.
Remember these are only guidelines. We'd be happy to pre-qualify you to help you determine how much you can afford.
Family Mortgage Company of Hawaii, Inc. NMLS #244497 can answer questions about these ratios and many others. Give us a call: (808) 935-0678.
Got a Question?
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.