Ratio of Debt to Income

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

How to figure your qualifying ratio

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

The first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything that makes up the payment.

The second number is what percent of your gross income every month which can be applied to housing costs and recurring debt together. Recurring debt includes things like car payments, child support and credit card payments.

Some example data:

A 28/36 ratio

  • 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'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our very useful Mortgage Loan Qualifying Calculator.

Just Guidelines

Don't forget these are only guidelines. We'd be happy to pre-qualify you to help you determine 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: (941) 366-5800.

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