Debt-to-Income Ratio

What is a 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 36% qualifying ratio for a conventional mortgage loan. 
  • These qualifying ratios are guidelines. An excellent credit history can help you qualify for a mortgage loan even if your debt load is over and above the limit. 
  • Call your ADR mortgage professional to select a loan documentation program that is best for you.

Understanding the qualifying ratio

  • Typically conventional loans have a qualifying ratio that max's out at 38%. 
  • Usually an FHA loan will allow for a higher debt load, reflected in a higher (29/41) qualifying ratio. 
    • FHA loans are another type of subprime loan and require a significantly higher mortgage insurance charge (similar to the 3.5% x mortgage balance hit you take on a VA loan). 
    • We can get you one if you like, but often times we can eliminate that nasty 3.5% "government benefit".
    •  We have saved people $7,000 on a VA loan before (on a $200,000 loan). So, don't think all lenders are created equal. We usually win and save you enough to purchase a new 42 inch plasma. 

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.