Ratio of Debt-to-Income

The ratio of debt to income is a formula lenders use to determine how much money is available for your monthly mortgage payment after you have met your various other monthly debt payments.

How to figure the qualifying ratio

Most conventional mortgages 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.

In 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, HOA dues, Private Mortgage Insurance - everything.

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

Examples:

With 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 with your own financial data, feel free to use our superb Mortgage Qualifying Calculator.

Guidelines Only

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

The Mortgage Firm - Team Meyers can answer questions about these ratios and many others. Give us a call: (407) 889-4321.

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