Debt/Income Ratio

Your debt to income ratio is a tool lenders use to determine how much of your income can be used for your monthly mortgage payment after all your other recurring debts have been fulfilled.

How to figure the qualifying ratio

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

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can go to housing (this includes principal and interest, PMI, homeowner's insurance, property tax, and homeowners' association dues).

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

For example:

With a 28/36 qualifying ratio

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 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 very useful Loan Pre-Qualifying Calculator.

Just Guidelines

Remember these ratios are only guidelines. We will be happy to go over pre-qualification to help you figure out how large a mortgage loan you can afford.

At The Mortgage Firm - Team Meyers, we answer questions about qualifying all the time. Call us: (407) 889-4321.

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