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Lenders use a ratio called "debt to income" to decide your maximum monthly payment after you have paid your other monthly debts.
About your qualifying ratio
Usually, underwriting for conventional mortgage loans requires 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 percentage of your gross monthly income that can be spent on housing costs (this includes mortgage principal and interest, private mortgage insurance, hazard insurance, property tax, and HOA dues).
The second number is what percent of your gross income every month which can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes payments on credit cards, auto/boat loans, child support, and the like.
Some example data:
With a 28/36 qualifying ratio
- Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
- Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
- Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses
If you'd like to calculate pre-approval numbers on your own income and expenses, use this Loan Qualification Calculator.
Remember these ratios are only guidelines.
We will be happy to help you pre-approve you to determine a mortgage loan that will suit your needs best.
Broward: 954.539.2000 | Dade: 305.387.0345
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