Debt/Income Ratio

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 your qualifying ratio

In general, conventional mortgages require 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 gross monthly income that can be spent on housing (this includes principal and interest, private mortgage insurance, homeowner's insurance, property tax, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt. For purposes of this ratio, debt includes payments on credit cards, auto loans, child support, etcetera.

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, we offer a Loan Qualifying Calculator.

Just Guidelines

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

Channel Mortgage LLC can answer questions about these ratios and many others. Give us a call: (718) 639-9500.

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