Ratio of Debt to Income

The ratio of debt to income is a tool lenders use to calculate how much money is available for a monthly mortgage payment after you have met your other monthly debt payments.

About the qualifying ratio

Typically, underwriting for conventional mortgages requires 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 in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be spent on housing costs (including loan principal and interest, PMI, hazard insurance, taxes, and HOA dues).

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

For example:

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'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our superb Mortgage Qualification Calculator.

Just Guidelines

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

U.S.A. Lending, Inc. can walk you through the pitfalls of getting a mortgage. Give us a call at 305-967-7200.




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