Ratio of Debt to Income

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


About your qualifying ratio

Most conventional mortgage 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.

For these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that constitutes the payment.

The second number in the ratio is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, auto/boat loans, child support, and the like.

Examples:

A 28/36 qualifying ratio

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, feel free to use our very useful Loan Qualifying Calculator.

Remember these ratios are just guidelines. We will be thrilled to help you pre-qualify to help you determine how large a mortgage loan you can afford. American Fidelity can walk you through the pitfalls of getting a mortgage. Give us a call at 8137665149. Want to get started? Apply Here.

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