Mortgage lenders use Debt To Income (DTI) Ratios to analyze your mortgage payment and determine how much loan you qualify for. The Front Ratio compares your total Housing Expenses to your Monthly Income, including Principal & Interest, Property Tax, Mortgage Insurance, and anything relating to your home. The Back Ratio compares your total Monthly Debt plus your Housing Expenses to your Monthly Income.
Conservative Debt To Income (DTI) ratios are 31/43. Aggressive ratios are 37/47. Some loan program will allow ratios to go up to 50%, but anything above that will likely be denied.
Use my calculator to compute your monthly payment and your Debt To Income Ratios. Simply CLICK the appropriate section and enter the purchase price, down payment, expected rate of interest, your monthly income and debt.
Purchase Price: $
Down Payment: $ ( %)
Loan Amount: $ ( %)
Note: Every loan program has its loan limit which varies by county. Please visit HUD for limits on FHA loans, VA for limits on VA loans, and FHFA for limits on Conventional loans. Loans exceeding conforming loan limits are considered Jumbo Loans.
Jumbo loans has minimum loan amounts which must be higher than conforming loan limits, and varies by counties. Please visit FHFA to check for conforming loan limit in your county.
Interest Rate: %
Property Tax Annual Rate: Property Tax is normally 1.20% of the purchased price annually. %
Mortgage Insurance Annual Rate: Mortgage Insurance is usually between 0.5% to 1.0% of the loan amount annually. %
Your Monthly Income: $
Your Monthly Liabilities: $
Principal & Interest: $
Property Tax: $
Mortgage Insurance: $
Homeowner Insurance: $
Your Front DTI Ratio: %
Your Back DTI Ratio: %
Note: Conservative DTI ratios are 31/43, Aggressive ratios are 37/47. Manual Underwriting may allow ratios to go up to 40/50 with 2 compensating factors. Ratios over 50% will likely be denied.
- The Federal Housing Administration (FHA) - which is part of HUD - insures the loan, so your lender can offer you a better deal.
- Down payment as low as 3.5%. Gift funds accepted, family members are welcome to help out with your down payment.
- Mortgage Insurance includes an Upfront Funding Fee of 1.75% of the loan amount, typically financed into the loan, and an annual insurance premium of 0.85%, which will be lumped into the monthly payment. For down payment of 5% or more, the annual insurance premium will be 0.80%.
- FHA has loan limit which varies by county. Please visit HUD to check the loan limit for your county. Below are loan limits for local counties in southern California:
- San Bernardino - $405,950
- Los Angeles - $679,650
- Orange - $679,650
- CalHFA MyHome - Down Payment Assistance - First Time Home Buyer
- Reverse Mortgage - Are you 62 or older? Do you live in your home? Do you own it outright or have a low loan balance? If you can answer "yes" to all of these questions, then the FHA Reverse Mortgage might be right for you. It lets you convert a portion of your equity into cash.
- No down payment as long as the sales price doesn't exceed the appraised value.
- No private mortgage insurance premium requirement.
- Upfront Funding Fee typically at 2.15% and can be financed into the loan. The actual funding fee for VA loans varies based on several factors, such as nature of service, down payment and first-time use
- VA rules limit the amount you can be charged for closing costs.
- Closing costs may be paid by the seller.
- The lender can't charge you a penalty fee if you pay the loan off early.
- VA may be able to provide you some assistance if you run into difficulty making payments.
You should also know that:
- You don't have to be a first-time homebuyer.
- You can reuse the benefit.
- VA-backed loans are assumable, as long as the person assuming the loan qualifies.
Learn more about VA Home Loans:
Don't have a big down payment? FHA's not your only option. Get a conventional 3% down loan.
- Down payment as low as 3% (even for first-time homebuyers).
- Reduce or even eliminate monthly Mortgage Insurance.
- Usually faster, easier and with a lower monthly payment than FHA.
- Use gift funds for your entire down payment.
- Conventional has loan limit which varies by county. Please visit FHFA to check the loan limit for your county. Below are loan limits for local counties in southern California:
- San Bernardino - $484,350
- Los Angeles - $726,525
- Orange - $726,525
Purchase a rural home with no money down.
- 100% financing - No down payment.
- Seller credits may help pay for closing costs.
- 1% Upfront Funding Fee, paid at closing and typically financed into the loan.
- Mortgage Insurance annual fee of 0.35% of the loan amount, lumped into the monthly payment and is paid for the life of the loan.
Learn more about USDA Loan:
- For loan amounts exceeding conforming loan limit
- 20% down payment is typically required, however, there are programs that will require only 10% down.
- No mortgage insurance
- Great fixed-rate and ARM loans available
- Starting at 720 FICO.
- Please visit FHFA to check the conforming loan limit for your county. Below are minimum loan amounts for local counties in southern California:
- San Bernardino - $484,350
- Los Angeles - $726,525
- Orange - $726,525
DISCLAIMER: Calculations by this tool are believed to be accurate, yet are not guaranteed.
- Mortgage Insurance is required for down payment less than 20%, except for VA Loan.
- FHA requires a 3.5% down payment as well as an upfront and monthly mortgage insurance in many cases.
- VA Loan does not require any down payment or monthly mortgage insurance, but has an upfront Funding Fee.
- Conservative Debt To Income (DTI) Ratios are 31/43, Aggressive Ratios are 37/47. Some loan program will allow ratios to go up to 50%, but anything above that will likely be denied.
- Closing Costs account for about 2%-5% of the purchase price.
- Every loan program has its loan limit which varies by county. Please visit HUD for limits on FHA loans, VA for limits on VA loans, and FHFA for limits on Conventional loans. Loans exceeding conforming loan limits are considered Jumbo Loans, which typically require a FICO score of 700+ and a down payments of 20 percent or more.
Looking To Purchase A Home?
1. Make sure your credit is in good shape
- Excellent Credit: 750+
- Good Credit: 700-749
- Fair Credit: 650-699
- Poor Credit: 600-649
Try to get your credit card balances below 40% of the limit. It's best to have at least 3 open and active accounts listed on your credit report
2. If you're renting, pay by check
Having documented proof of your last 12 months of payments is often required by the lender
3. Obtain proof of employment for the past 2-years
- W2s and tax returns
- Paystubs covering 30 days
- Be prepared to explain any gaps in employment
How Much House Can You Afford?
Before you start shopping for a new home, determine how much you can afford to spend.
Here are a few things to consider:
- Your monthly income
- Your available funds for down payment
- Your monthly expenses
- Your credit score
It's important to consider getting pre-approved from a licensed mortgage professional. An Independent Mortgage Professional will be able to offer you several loan options and find the best available loan program for your needs.
6 Things Not To Do When Applying For A Mortgage
When lenders review your application, they like to see consistency in your finances.
- Do not make major purchases like furniture, appliances, jewelry, vehicles or vacations
- Don't change or quit your job
- Consult with your mortgage professional before withdrawing, depositing, or moving large amounts of money in or out of your bank account
- Do not pay off debts or collections (unless instructed to do so by a mortgage professional)
- Avoid using cash for a good-faith deposit - cash is difficult to verify and could result in a closing delay
- Don't have your credit report pulled too many times - this can hurt your credit score