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 monthly loans.


Understanding the qualifying ratio

For the most part, conventional 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 amount (as a percentage) of gross monthly income that can be applied to housing (including principal and interest, private mortgage insurance, hazard insurance, taxes, and HOA dues).

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

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 want to run your own numbers, use this Mortgage Qualifying Calculator.

Remember these ratios are just guidelines. We'd be thrilled to go over pre-qualification to help you figure out how much you can afford. Service First Mortgage can walk you through the pitfalls of getting a mortgage. Call us at (214) 945-1066. Ready to begin? Apply Now.

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