Debt/Income Ratio

Your debt to income ratio is a tool lenders use to calculate how much of your income is available for a monthly home loan payment after you have met your other monthly debt payments.

About your qualifying ratio

Usually, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be spent on housing (including mortgage principal and interest, PMI, homeowner's insurance, property taxes, and HOA dues).

The second number in the ratio is what percent of your gross income every month that should be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes credit card payments, vehicle loans, child support, and the like.

Examples:

28/36 (Conventional)

  • 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, we offer a Mortgage Qualifying Calculator.

Guidelines Only

Don't forget these are just 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. Call us at (941) 366-5800.

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