Ratio of Debt to Income

The debt to income ratio is a formula lenders use to determine how much of your income can be used for a monthly home loan payment after all your other recurring debt obligations have been fulfilled.

About your qualifying ratio

In general, underwriting for conventional mortgage loans requires 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 in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be applied to housing costs (including mortgage principal and interest, private mortgage insurance, hazard 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 applied to housing costs and recurring debt. Recurring debt includes auto payments, child support and monthly credit card payments.

Some example data:

28/36 (Conventional)

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

Just Guidelines

Don't forget these are only guidelines. We will be thrilled to go over pre-qualification to help you figure out how large a mortgage 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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