Ratio of Debt-to-Income

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

Understanding your qualifying ratio

For the most part, conventional loans require a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

For these ratios, the first number is how much (by percent) 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 full payment.

The second number in the ratio is what percent of your gross income every month that can be applied to housing expenses and recurring debt together. Recurring debt includes things like auto loans, child support and monthly credit card payments.

Some example data:

28/36 (Conventional)

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, please use this Mortgage Pre-Qualifying Calculator.

Just Guidelines

Remember these are just guidelines. We will be thrilled to help you pre-qualify to help you figure out how large a mortgage you can afford.

First Southeast Mortgage Corporation can answer questions about these ratios and many others. Give us a call at 954.920.9799.

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