Debt/Income Ratio

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

Understanding the qualifying ratio

Most conventional loans require 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 gross monthly income that can be spent on housing costs (including principal and interest, private mortgage insurance, hazard insurance, property taxes, and HOA dues).

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

For example:

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 want to calculate pre-qualification numbers on your own income and expenses, feel free to use our very useful Mortgage Loan Qualification Calculator.

Guidelines Only

Remember these are just guidelines. We'd be thrilled to help you pre-qualify to determine how much you can afford.

At PREMIERE MORTGAGE SERVICES, INC., we answer questions about qualifying all the time. Call us at 978-422-2311.

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