Debt-to-Income Ratio

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after your other monthly debts are paid.

How to figure the qualifying ratio

Most underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be applied to housing costs (this includes loan principal and interest, PMI, hazard insurance, property taxes, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income that should be spent on housing costs and recurring debt. Recurring debt includes things like vehicle payments, child support and monthly credit card payments.

Examples:

With a 28/36 ratio

  • 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 want to calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Qualification Calculator.

Guidelines Only

Don't forget these are just guidelines. We will be thrilled to help you pre-qualify to help you determine how large a mortgage you can afford.

At America's Money Source, we answer questions about qualifying all the time. Give us a call at (407) 898-7559.

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