Ratio of Debt-to-Income

Your ratio of debt to income is a tool lenders use to calculate how much of your income can be used for a monthly home loan payment after you have met your various other monthly debt payments.

Understanding 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) qualifying ratio.

For these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything.

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 things like vehicle loans, child support and credit card payments.

Examples:

A 28/36 qualifying ratio

  • 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 run your own numbers, feel free to use our Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

Remember these ratios are just guidelines. We will be happy to help you pre-qualify to help you figure out how large a mortgage loan you can afford.

Channel Mortgage LLC can walk you through the pitfalls of getting a mortgage. Give us a call: (718) 639-9500.

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