Ratio of Debt-to-Income

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

About the qualifying ratio

Typically, conventional mortgages require a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

In these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything.

The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing costs and recurring debt. Recurring debt includes auto payments, child support and monthly credit card payments.

Examples:

28/36 (Conventional)

  • 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, we offer a Mortgage Loan Qualification Calculator.

Guidelines Only

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

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

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