Debt-to-Income Ratio

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after your other monthly debts are paid.

About the qualifying ratio

Usually, underwriting for conventional mortgages 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.

The first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - 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 together. For purposes of this ratio, debt includes credit card payments, vehicle loans, 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 very useful Mortgage Loan Pre-Qualifying Calculator.

Just Guidelines

Remember these are only guidelines. We will be thrilled to help you pre-qualify to determine how much you can afford.

At Channel Mortgage LLC, we answer questions about qualifying all the time. Call us: (718) 639-9500.

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