Ratio of Debt to Income

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

Understanding your qualifying ratio

Usually, underwriting for conventional mortgages needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

In these ratios, the first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that constitutes the full payment.

The second number in the ratio is what percent of your gross income every month that can be spent on housing costs and recurring debt together. Recurring debt includes things like auto payments, child support and monthly credit card payments.

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 want to run your own numbers, please use this Loan Pre-Qualifying Calculator.

Just Guidelines

Don't forget these are just guidelines. We will be thrilled to go over pre-qualification to determine how large a mortgage loan you can afford.

The Mortgage Exchange Service LLC can walk you through the pitfalls of getting a mortgage. Give us a call at 703.255-5810.

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