leftDebt to Income Ratio

Your debt to income ratio is simply a way of determining how much money is available for your monthly mortgage payment after all your other recurring debt obligations are met.


Debt limit

There is generally a debt limit associated with each type of loan, such as a 32/45 qualifying ratio for a conventional loan. These qualifying ratios are guidelines. An excellent credit history can help you qualify for a mortgage loan even if your debt load is over and above the limit.

 

Understanding the qualifying ratio

Typically conventional loans have a qualifying ratio of 28/36. Usually an FHA loan will allow for a higher debt load, reflected in a higher (31/43) qualifying ratio.

 

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be applied to housing (including loan principal and interest, private mortgage insurance, hazard insurance, property taxes and homeowner's association dues).

 

The second number is the maximum percentage of your gross monthly income that can be applied to housing expenses and recurring debt. Recurring debt includes things like car loans, child support and monthly credit card payments.

 

 

For example: 

 

With a 32/45qualifying ratio:

 

  • Gross monthly income of $3,500 x .32 = $1,120 can be applied to housing
  • Gross monthly income of $3,500 x .45 = $1,575 can be applied to recurring debt plus housing expenses

 

With a 31/43 qualifying ratio: 

  • Gross monthly income of $3,500 x .31 = $1,085 can be applied to housing
  • Gross monthly income of $3,500 x .43 = $1,505 can be applied to recurring debt plus housing expenses

To calculate the expenses, minimum monthly credWhere applicapleit card payments are added to installment loan payments and housing expense (principal, interest, taxes, homeowner's insurance), Condo or HOA fees and mortgage insurance are added when applicaple.

 

Simply guidelines

Remember these are just guidelines. We’d be happy to pre-qualify you to determine how large a mortgage loan you can afford. Once we receive your application, we will search our database of over 100 major banks and wholesale lenders to find the lowest mortgage rate and best terms to meet your criteria.  We look forward to helping you buy your dream home.

 

 

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