Ratio of Debt-to-Income

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

How to figure your qualifying ratio

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

In these ratios, the first number is the percentage of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything.

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

Examples:

28/36 (Conventional)

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, use this Mortgage Loan Qualification Calculator.

Guidelines Only

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

New Millennium Mortgage Co. NMLS: 331173 can walk you through the pitfalls of getting a mortgage. Give us a call at (941) 366-5800.

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