Ratio of Debt-to-Income

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

Understanding the qualifying ratio

For the most part, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

For these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything.

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

Examples:

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 want to run your own numbers, we offer a Mortgage Qualification Calculator.

Just Guidelines

Remember these ratios are only guidelines. We'd be thrilled to go over pre-qualification to determine how much you can afford.

America's Money Source can answer questions about these ratios and many others. Call us: 4078987559.


America's Money Source

2306 Curry Ford Rd
Orlando, FL 32806