Debt to Income Ratio

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after you've paid your other recurring loans.

Understanding the 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 your gross monthly income that can go to housing costs (including principal and interest, PMI, homeowner's insurance, taxes, and homeowners' association dues).

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

For example:

With a 28/36 qualifying ratio

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, feel free to use our superb Mortgage Qualification Calculator.

Just Guidelines

Remember these are just guidelines. We will be happy to pre-qualify you to help you determine how large a mortgage loan you can afford.

Americn Hero Mortgage can walk you through the pitfalls of getting a mortgage. Call us at 754-202-4376.

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