Your debt to income ratio is a tool lenders use to calculate how much of your income can be used for your monthly mortgage payment after you meet your various other monthly debt payments.
Usually, underwriting for conventional mortgage loans needs 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 (including loan principal and interest, PMI, homeowner's insurance, property tax, and homeowners' association dues).
The second number is what percent of your gross income every month which can be applied to housing expenses and recurring debt. Recurring debt includes car loans, child support and monthly credit card payments.
Examples: 28/36 (Conventional) Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses
Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses
Remember these are just guidelines. We will be happy to help you pre-qualify to determine how much you can afford. Vivid Mortgages, Inc. can walk you through the pitfalls of getting a mortgage. Give us a call: 800-880-8557.
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Get pre-qualified online, or call and a broker will walk you through your options. No obligation, and pre-qualifying does not affect your credit score.
