Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after your other recurring debts are paid.

About the qualifying ratio

For the most part, conventional mortgage loans need 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 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, homeowners' dues, Private Mortgage Insurance - everything that makes up the full payment.

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

For example:

28/36 (Conventional)

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, feel free to use our superb Mortgage Loan Pre-Qualifying Calculator.

Guidelines Only

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

Chris Caggiano - Grand Oaks Funding, LLC can walk you through the pitfalls of getting a mortgage. Call us: (718) 477-4405.

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