Ratio of Debt-to-Income

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

About the qualifying ratio

For the most part, 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 percentage of gross monthly income that can go to housing costs (this includes mortgage principal and interest, PMI, hazard insurance, property tax, and homeowners' association 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. For purposes of this ratio, debt includes payments on credit cards, vehicle loans, child support, and the like.

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 calculate pre-qualification numbers on your own income and expenses, feel free to use our Mortgage Pre-Qualifying Calculator.

Guidelines Only

Don't forget these are only guidelines. We'd be happy to go over pre-qualification to determine how large a mortgage you can afford.

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

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