Debt-to-Income Ratio

Your ratio of debt to income is a formula lenders use to calculate 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

For the most part, conventional mortgages need a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

In these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that makes up the full payment.

The second number in the ratio is what percent of your gross income every month which can be applied to housing expenses and recurring debt together. Recurring debt includes credit card payments, car loans, child support, and the like.

Examples:

With a 28/36 qualifying 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'd like to calculate pre-qualification numbers with your own financial data, use this Loan Pre-Qualification Calculator.

Just Guidelines

Remember these are only guidelines. We will be happy to pre-qualify you to help you determine how much you can afford.

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

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