Debt Ratios for Home Financing
Lenders use a ratio called "debt to income" to decide your maximum monthly payment after your other recurring debts are paid.
About your qualifying ratio
Usually, underwriting for conventional loans requires a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.
The first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything.
The second number in the ratio is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, car payments, child support, and the like.
With a 28/36 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, feel free to use our Mortgage Loan Pre-Qualifying Calculator.
Remember these ratios are only guidelines. We'd be happy to pre-qualify you to help you figure out how large a mortgage loan you can afford.
Saab Mortgage can walk you through the pitfalls of getting a mortgage. Call us: 703-288-0777.
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