Ratio of Debt-to-Income

Your debt to income ratio is a tool lenders use to determine how much money is available for a monthly mortgage payment after all your other recurring debt obligations have been met.

Understanding the qualifying ratio

In general, conventional 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) qualifying ratio.

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

The second number is what percent of your gross income every month that can be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, car loans, child support, and the like.

Some example data:

A 28/36 qualifying ratio

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, feel free to use our Mortgage Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We will be happy to pre-qualify you to determine how much you can afford.

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

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