Debt/Income Ratio

The ratio of debt to income is a formula lenders use to calculate how much of your income can be used for your monthly home loan payment after you have met your various other monthly debt payments.

How to figure the qualifying ratio

Most 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 amount (as a percentage) of your gross monthly income that can be applied to housing (including principal and interest, PMI, hazard insurance, property taxes, and HOA dues).

The second number is what percent of your gross income every month that can be spent on housing expenses and recurring debt. For purposes of this ratio, debt includes credit card payments, car loans, child support, and the like.

Some example data:

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, we offer a Mortgage Qualifying Calculator.

Just Guidelines

Don't forget these ratios are only guidelines. We'd be thrilled to help you pre-qualify to help you figure out how much 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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