Debt/Income Ratio

Your debt to income ratio is a formula lenders use to calculate how much money is available for your monthly home loan payment after all your other monthly debt obligations have been met.

How to figure the qualifying ratio

Usually, underwriting for conventional mortgages needs a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can go to housing costs (this includes mortgage principal and interest, PMI, hazard insurance, property tax, and HOA dues).

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 vehicle loans, child support and monthly credit card payments.

Some example data:

A 28/36 ratio

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, please use this Mortgage Qualification Calculator.

Just Guidelines

Don't forget these are only guidelines. We'd be thrilled to help you pre-qualify to determine how large a mortgage you can afford.

Americn Hero Mortgage can answer questions about these ratios and many others. Give us a call: 754-202-4376.

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