Debt to Income Ratio

The debt to income ratio is a tool lenders use to calculate how much of your income can be used for a monthly home loan payment after you meet your various other monthly debt payments.

Understanding your qualifying ratio

Usually, conventional mortgage loans require a qualifying ratio of 28/36. FHA loans are less strict, 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 hazard insurance, HOA dues, PMI - everything that constitutes the full payment.

The second number in the ratio is what percent of your gross income every month that can be applied to housing costs and recurring debt together. Recurring debt includes credit card payments, vehicle payments, child support, and the like.

Examples:

28/36 (Conventional)

  • 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'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our superb Loan Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We'd be happy to go over pre-qualification to help you determine how large a mortgage you can afford.

Hawk Mortgage Group can walk you through the pitfalls of getting a mortgage. Give us a call at (443) 619-7900.

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