Debt-to-Income Ratio

Your ratio of debt to income is a formula lenders use to determine how much money is available for your monthly home loan payment after you meet your various other monthly debt payments.

How to figure your qualifying ratio

Most 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 amount (as a percentage) of gross monthly income that can be applied to housing costs (this includes loan principal and interest, private mortgage insurance, homeowner's insurance, property tax, and HOA dues).

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

Examples:

With a 28/36 qualifying 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 want to calculate pre-qualification numbers on your own income and expenses, please use this Mortgage Pre-Qualifying Calculator.

Guidelines Only

Remember these ratios are only guidelines. We'd be happy to help you pre-qualify to determine how large a mortgage loan you can afford.

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

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