Debt to Income Ratio

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

How to figure the qualifying ratio

Typically, conventional mortgages require 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 go to housing (including loan principal and interest, PMI, hazard insurance, property tax, and HOA dues).

The second number is what percent of your gross income every month that can be spent on housing expenses and recurring debt. Recurring debt includes vehicle payments, child support and monthly credit card payments.

Examples:

A 28/36 ratio

  • 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, feel free to use our Loan Pre-Qualifying Calculator.

Guidelines Only

Don't forget these are only guidelines. We'd be happy to go over pre-qualification to help you determine how much you can afford.

Sublime Financial can walk you through the pitfalls of getting a mortgage. Call us at 9722920448.

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