Ratio of Debt to Income

The ratio of debt to income is a formula lenders use to calculate how much of your income is available for a monthly mortgage payment after you have met your other monthly debt payments.


Understanding your qualifying ratio

Typically, underwriting for conventional mortgages in Chandler AZ  requires a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

For these ratios, the first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month that should be spent on housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, auto loans, child support, et cetera.

Some example data:

With a 28/36 qualifying ratio

  • 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 want to run your own numbers, we offer a Mortgage Pre-Qualifying Calculator.

Remember these ratios are just guidelines. We'd be happy to help you pre-qualify to determine how large a mortgage loan you can afford. At Chandler Mortgage, we answer questions about qualifying all the time. Call us: 480-390-4995. 

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