Debt-to-Income Ratio

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

Understanding the qualifying ratio

For the most part, conventional loans need a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can go to housing costs (including mortgage principal and interest, PMI, hazard insurance, property tax, and HOA dues).

The second number in the ratio is what percent of your gross income every month that should be applied to housing expenses and recurring debt. Recurring debt includes auto payments, child support and credit card payments.

For example:

28/36 (Conventional)

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, we offer a Mortgage Loan Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We'd be thrilled to help you pre-qualify to help you figure out how much you can afford.

1st Credential Mortgage Inc can walk you through the pitfalls of getting a mortgage. Call us: (281) 778-0805.

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