Ratio of Debt-to-Income

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

About your qualifying ratio

In general, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can go to housing costs (including mortgage principal and interest, PMI, homeowner's insurance, property tax, and homeowners' association dues).

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

Examples:

A 28/36 qualifying ratio

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, we offer a Mortgage Qualification Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We will be happy to go over pre-qualification to help you determine how much you can afford.

At Americn Hero Mortgage, we answer questions about qualifying all the time. Give us a call: 754-202-4376.

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