Ratio of Debt to Income

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

How to figure the qualifying ratio

Usually, underwriting for conventional mortgage loans requires a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

In these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything that constitutes the payment.

The second number 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, car payments, child support, and the like.

Examples:

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

Guidelines Only

Remember these ratios are just guidelines. We'd be thrilled to go over pre-qualification to determine how much you can afford.

Great Mortgage NMLS#478647 can answer questions about these ratios and many others. Call us at 708.966.9005.

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