Ratio of Debt-to-Income

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

How to figure the qualifying ratio

Usually, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are less strict, requiring a 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 (including loan principal and interest, PMI, hazard insurance, property tax, and homeowners' association dues).

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

Examples:

28/36 (Conventional)

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, feel free to use our superb Mortgage Qualification Calculator.

Just Guidelines

Remember these are just guidelines. We'd be thrilled to go over pre-qualification to help you figure out how large a mortgage loan you can afford.

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

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