Debt to Income Ratio

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after you've paid your other monthly loans.

About the qualifying ratio

In general, conventional loans require 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 gross monthly income that can go to housing costs (this includes principal and interest, private mortgage insurance, homeowner's insurance, property taxes, and HOA dues).

The second number in the ratio 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/boat loans, child support and monthly credit card payments.

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 on your own income and expenses, please use this Loan Pre-Qualification Calculator.

Just Guidelines

Remember these are only guidelines. We'd be happy to pre-qualify you 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. Give us a call: (407) 889-4321.

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