Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after you've paid your other recurring debts.

How to figure your qualifying ratio

Typically, underwriting for conventional mortgages requires 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.

The first number is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything that makes up the payment.

The second number is what percent of your gross income every month that can be applied to housing expenses and recurring debt. For purposes of this ratio, debt includes payments on credit cards, car loans, child support, etcetera.

Some example data:

28/36 (Conventional)

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 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 Loan Pre-Qualification Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We will be thrilled to help you pre-qualify to help you determine how much you can afford.

The Mortgage Firm - Team Meyers can walk you through the pitfalls of getting a mortgage. Give us a call: (407) 889-4321.

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