Debt-to-Income Ratio

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

About your qualifying ratio

In general, underwriting for conventional loans needs 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 costs (including mortgage principal and interest, PMI, hazard insurance, property tax, and HOA dues).

The second number is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt. Recurring debt includes payments on credit cards, auto/boat payments, child support, and the like.

For example:

A 28/36 qualifying ratio

  • 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 want to calculate pre-qualification numbers on your own income and expenses, use this Mortgage Qualifying Calculator.

Just Guidelines

Remember these are just guidelines. We will be happy to help you pre-qualify to determine how much you can afford.

At New Millennium Mortgage Co. NMLS: 331173, we answer questions about qualifying all the time. Give us a call at (941) 366-5800.

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