The debt to income ratio is a formula lenders use to calculate how much of your income is available for a monthly mortgage payment after all your other recurring debt obligations have been met.
Most conventional loans need a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (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 the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt. Recurring debt includes auto/boat payments, child support and monthly credit card payments.
A 28/36 ratio
With a 29/41 (FHA) qualifying ratio
If you want to calculate pre-qualification numbers with your own financial data, please use this Loan Pre-Qualification Calculator.
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