Ratio of Debt to Income

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

How to figure your qualifying ratio

Most conventional mortgages need a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

The first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything that constitutes the payment.

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

For example:

28/36 (Conventional)

  • 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'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our superb Loan Qualification Calculator.

Just Guidelines

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

At America's Money Source, we answer questions about qualifying all the time. Call us at 4078987559.


America's Money Source

2306 Curry Ford Rd
Orlando, FL 32806