Debt to Income Ratio

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other recurring debts have been paid.

About the qualifying ratio

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

In these ratios, the first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, car loans, child support, and the like.

For example:

With a 28/36 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'd like to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Qualification Calculator.

Guidelines Only

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

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

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