Debt-to-Income Ratio

Your ratio of debt to income is a tool lenders use to calculate how much money is available for a monthly mortgage payment after you have met your other monthly debt payments.

About your qualifying ratio

Usually, conventional loans 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.

For these ratios, the first number is the percentage of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything.

The second number is what percent of your gross income every month that should be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, car payments, child support, and the like.

For example:

28/36 (Conventional)

  • 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 want to calculate pre-qualification numbers on your own income and expenses, we offer a Loan Pre-Qualifying Calculator.

Just Guidelines

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

Contemporary Mortgage Services, Inc can walk you through the pitfalls of getting a mortgage. Give us a call at 407-834-3377.

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