Ratio of Debt to Income

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other recurring debts have been paid.

Understanding the qualifying ratio

In general, conventional mortgage loans require a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

For these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything that makes up the full payment.

The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing expenses and recurring debt together. Recurring debt includes car payments, child support and monthly credit card payments.

For example:

28/36 (Conventional)

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our Mortgage Loan Pre-Qualifying Calculator.

Just Guidelines

Remember these ratios are just guidelines. We will be happy to help you pre-qualify to determine how large a mortgage loan you can afford.

America's Money Source can answer questions about these ratios and many others. Give us a call at (407) 898-7559.

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