Debt/Income Ratio

The debt to income ratio is a formula lenders use to calculate how much money can be used for a monthly home loan payment after you meet your other monthly debt payments.

About the qualifying ratio

Usually, 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) ratio.

For these ratios, the first number is the percentage of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything that makes up the payment.

The second number is what percent of your gross income every month that can be applied to housing costs and recurring debt together. Recurring debt includes credit card payments, auto loans, child support, etcetera.

Examples:

28/36 (Conventional)

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, use this Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We will be happy to help you pre-qualify to determine how much you can afford.

At My FL Home Loans, Inc., we answer questions about qualifying all the time. Give us a call at (727) 743-1620.

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