Ratio of Debt to Income

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you have paid your other recurring loans.

About the qualifying ratio

In general, 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 in a qualifying ratio is the maximum percentage of gross monthly income that can be spent on housing (this includes principal and interest, private mortgage insurance, hazard insurance, property tax, and homeowners' association dues).

The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing expenses and recurring debt together. Recurring debt includes credit card payments, car payments, child support, etcetera.

Examples:

With a 28/36 ratio

  • 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'd like to calculate pre-qualification numbers with your own financial data, please use this Mortgage Pre-Qualification Calculator.

Just Guidelines

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

American Mortgage Advisers, Inc can answer questions about these ratios and many others. Call us: 214-865-7442.

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