Debt-to-Income Ratio

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after your other monthly debts have been paid.

How to figure your qualifying ratio

In general, underwriting for conventional mortgage loans requires 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 (including mortgage principal and interest, private mortgage insurance, hazard insurance, property taxes, and HOA dues).

The second number is what percent of your gross income every month that should be spent on housing expenses and recurring debt together. Recurring debt includes credit card payments, car loans, child support, etcetera.

For example:

28/36 (Conventional)

  • 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 calculate pre-qualification numbers on your own income and expenses, we offer a Loan Pre-Qualification Calculator.

Guidelines Only

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

1st Credential Mortgage Inc can answer questions about these ratios and many others. Give us a call: (281) 778-0805.

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