FHA Debt to income ratios, what are debt to income ratios

Debt 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 28/36 qualifying ratio for a conventional loan. The debt to income ration for FHA mortgages is 31/43. These qualifying ratios are guidelines and not hard rules. An excellent to good 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. Personally, I have approved FHA mortgages with debt to income ratios as high as 55%, but it is best to keep your FHA mortgage total debt ratio at 50% or less.

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, home owners 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. If it is on your credit report and has a monthly payment

For example:

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 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

Simply guidelines

Remember these are just guidelines. We’d be happy to pre-qualify you to determine the mortgage loan you can afford. We look forward to helping you buy your dream home. Feel free to contact me if you have any questions, or would like to get pre-qualified.

Today's Rates:

Mtg Loan

Rate

APR

30-yr Fixed	3.79%	3.91%
15-yr Fixed	3.04%	3.2%
1-yr Adj	2.78%	3.45%

* national averages

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