Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you've paid your other recurring debts.

How to figure your qualifying ratio

Typically, underwriting for conventional 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.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be applied to housing costs (this includes principal and interest, private mortgage insurance, hazard insurance, property tax, and homeowners' association dues).

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

Examples:

With a 28/36 qualifying ratio

  • 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 want to calculate pre-qualification numbers on your own income and expenses, use this Mortgage Qualification Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We'd be happy to help you pre-qualify to determine how large a mortgage loan you can afford.

PREMIERE MORTGAGE SERVICES, INC. can walk you through the pitfalls of getting a mortgage. Call us at 978-422-2311.

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