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 45% qualifying ratio for a conventional loan. This qualifying ratios is a guideline. An excellent credit history can help you qualify for a mortgage loan even if your debt load is over and above the limit, but lending requiresments have been getting more stringent during the past year.

Understanding the qualifying ratio

Typically conventional loans have a qualifying ratio of 45%.

To make this simple to understand we have included an example below so that you will know how large a loan you may qualify for. 

For example: 

Total Gross Monthly Income:    $10,000

Total Gross Debt Payments:      $4,500

(The debt payments include your mortgage, homeowners taxes, insurance, auto payments, credit card and any other recurreing debt)

In this example the debt to income ratio (DTI) is 45% and you would be approved for your loan so long as your credit history is good and the value of your home supports the loan amount.

Simply guidelines

Remember these are just guidelines. We’d be happy to pre-qualify you to determine how large a mortgage loan you can afford.  We look forward to helping you buy your dream home.