Debt to income ratios - Trinity Funding, Inc.

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. 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.

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 (29/41) qualifying ratio.

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, hazard 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.

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 how large a mortgage loan you can afford. We look forward to helping you buy your dream home.

Peter Ma is licensed under the laws of the State of Texas and by State Law is subject to Regulatory oversight by The Department of Savings and Mortgage Lending, any consumer wishing to file a compliant against Peter Ma should complete, sign, and send a complaint form to The Department of Savings and Mortgage Lending, 2601 North Lamar, Suite 201, Austin, Texas 78705. Complaint forms and instructions may be downloaded and printed from the Department web site located at www.sml.state.tx.us or obtained from the Department upon request by mail at the address above, by telephone at its toll-free consumer hotline at 1-877-276-5550, by fax at (512)475-1360, or by e-mail at smlinfo@sml,state.tx.us.

The Department maintains the mortgage broker recovery fund to make payments of certain types of judgements against a mortgage broker or loan officer. Not all claims are compensable and a court must order the payment of a claim from the recovery fund before the Department may pay a claim. For more information about the recovery fund, please consult Subchapter F of The Mortgage Broker License Act on the Department's web site referenced above.