Debt/Income Ratio

Your ratio of debt to income is a tool lenders use to determine how much of your income is available for your monthly mortgage payment after all your other recurring debts have been met.

About the qualifying ratio

Usually, conventional mortgage 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.

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 that constitutes the payment.

The second number in the ratio is the maximum percentage of your gross monthly income which can be spent on housing expenses and recurring debt. Recurring debt includes auto/boat loans, child support and monthly credit card payments.

Examples:

28/36 (Conventional)

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, use this Mortgage Qualifying Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We will be happy to help you pre-qualify to help you determine how large a mortgage loan you can afford.

American Mortgage Advisers, Inc can answer questions about these ratios and many others. Give us a call: 2147390569.

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