Debt to Income Ratio

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

Understanding the qualifying ratio

Typically, conventional loans need a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

For these ratios, the first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything that constitutes the payment.

The second number is what percent of your gross income every month which can be spent on housing costs and recurring debt. Recurring debt includes things like auto/boat loans, child support and monthly credit card payments.

Some example data:

With a 28/36 ratio

• 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 want to run your own numbers, feel free to use our Mortgage Loan Pre-Qualifying Calculator.

Guidelines Only

Don't forget these are just guidelines. We will be thrilled to go over pre-qualification to determine how large a mortgage loan you can afford.

Debbie Oliver NMLS License #248252, America's First Choice Mortgage, NMLS License #279234 can walk you through the pitfalls of getting a mortgage. Call us: 2146635355.