Ratio of Debt-to-Income

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

How to figure the qualifying ratio

For the most part, 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) qualifying ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be applied to housing (this includes mortgage principal and interest, PMI, hazard insurance, property taxes, and homeowners' association dues).

The second number in the ratio is the maximum percentage of your gross monthly income that should be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes credit card payments, vehicle payments, child support, and the like.

For example:

A 28/36 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 calculate pre-qualification numbers on your own income and expenses, feel free to use our very useful Loan Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We will be thrilled to pre-qualify you to help you determine how much you can afford.

MidTowne Mortgage can walk you through the pitfalls of getting a mortgage. Call us: (478) 746-2063.

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