Debt/Income Ratio

The ratio of debt to income is a formula lenders use to determine how much of your income is available for your monthly mortgage payment after you have met your various other monthly debt payments.

How to figure your qualifying ratio

Most conventional mortgages 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 be applied to housing (including loan principal and interest, private mortgage insurance, hazard insurance, taxes, and homeowners' association dues).

The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing costs and recurring debt. Recurring debt includes things like auto/boat payments, child support and monthly credit card payments.

Examples:

28/36 (Conventional)

  • 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 want to run your own numbers, we offer a Mortgage Pre-Qualification Calculator.

Just Guidelines

Remember these are just guidelines. We will be thrilled to go over pre-qualification to help you figure out how large a mortgage loan you can afford.

At Americn Hero Mortgage, we answer questions about qualifying all the time. Call us at 754-202-4376.

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