Ratio of Debt-to-Income

The ratio of debt to income is a tool lenders use to calculate how much money is available for your monthly home loan payment after all your other recurring debts are met.

Understanding the qualifying ratio

In general, conventional loans require a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything that constitutes the full payment.

The second number is the maximum percentage of your gross monthly income which can be applied to housing expenses and recurring debt. Recurring debt includes vehicle loans, child support and monthly credit card payments.

For example:

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'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our very useful Loan Qualification Calculator.

Guidelines Only

Remember these ratios are just guidelines. We will be happy to help you pre-qualify to help you figure out how large a mortgage 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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