Ratio of Debt to Income

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

Understanding your qualifying ratio

Typically, underwriting for conventional mortgage 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.

In these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything that makes up the payment.

The second number is what percent of your gross income every month that can be spent on housing costs and recurring debt. For purposes of this ratio, debt includes payments on credit cards, auto/boat loans, child support, etcetera.

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 Pre-Qualifying Calculator.

Just Guidelines

Remember these are just guidelines. We will be thrilled to go over pre-qualification to determine how much you can afford.

First Southeast Mortgage Corporation can answer questions about these ratios and many others. Call us: 954.920.9799.

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