Debt to Income Ratio

The debt to income ratio is a formula lenders use to calculate how much of your income is available for a monthly mortgage payment after all your other monthly debts have been met.

How to figure your qualifying ratio

Typically, underwriting for conventional mortgages needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

In these ratios, the first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing costs and recurring debt. Recurring debt includes credit card payments, auto loans, child support, etcetera.

Examples:

28/36 (Conventional)

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, please use this Loan Qualifying Calculator.

Just Guidelines

Remember these are only guidelines. We'd be happy to pre-qualify you to determine how large a mortgage you can afford.

My FL Home Loans, Inc. can answer questions about these ratios and many others. Give us a call at (727) 743-1620.

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