Debt to Income Ratio
Debt to Income Ratio
At Hook & Ladder Lending, we understand that the mortgage lending process can be complex and overwhelming. That's why we strive to make it easy for our valued customers in Texas. One important factor to consider when applying for a mortgage is the Debt to Income Ratio. Our team of experienced Texas mortgage bankers is here to guide you through this crucial aspect of the lending process.
What Is It?
The Debt to Income Ratio is a financial measure used by lenders to assess your ability to manage monthly mortgage payments. It compares your total monthly debt payments to your gross monthly income. Lenders typically use two ratios: 28/36 for conventional mortgages and 29/41 for FHA loans.
About The Qualifying Ratio
For conventional mortgages, the 28/36 ratio means that 28% of your gross monthly income can be allocated towards housing costs, including homeowners' insurance, dues, and Private Mortgage Insurance. The second number, 36%, represents the maximum percentage of your gross income that can be used for recurring debt and housing expenses combined.
For FHA loans, the qualifying ratio increases to 29/41, allowing for a higher debt load. This means that 29% of your gross monthly income can be applied to housing costs, while 41% can be applied to recurring debt and housing expenses.
Some Example Data
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
Keep In Mind These Are Just Guidelines
It's important to remember that these ratios are guidelines and not strict rules. We at Hook at Ladder Lending have seen approvals as high as 42-50% back end debt ratios. At Hook & Ladder Lending, we understand that every individual's financial situation is unique. We have a team of the best mortgage lenders in Texas that is dedicated to helping you pre-qualify and determine the maximum mortgage amount you can afford based on your specific circumstances.
Understanding the Debt to Income Ratio is essential when applying for a mortgage. At Hook & Ladder Lending, our Texas mortgage bankers have over 20 years of experience providing financial expertise in Texas. We are committed to outstanding service, customer satisfaction, and making mortgage lending a breeze. Contact us today to discuss your mortgage lending needs and let our knowledgeable team assist you in getting the best possible deal.