Ratio of Debt to Income

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after you've paid your other recurring loans.

Understanding the qualifying ratio

For the most part, underwriting for conventional loans requires a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can go to housing (including loan principal and interest, private mortgage insurance, homeowner's insurance, property taxes, and homeowners' association dues).

The second number is what percent of your gross income every month that should be applied to housing costs and recurring debt. Recurring debt includes payments on credit cards, car payments, child support, etcetera.

For example:

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 run your own numbers, use this Mortgage Loan Qualification Calculator.

Just Guidelines

Don't forget these are just guidelines. We'd be happy to help you pre-qualify to help you figure out how large a mortgage loan you can afford.

Contemporary Mortgage Services, Inc can answer questions about these ratios and many others. Give us a call at 407-834-3377.

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