Ratio of Debt-to-Income

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

Understanding your qualifying ratio

For the most part, 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 in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can go to housing (including loan principal and interest, private mortgage insurance, hazard insurance, property taxes, and HOA dues).

The second number is what percent of your gross income every month that can be spent on housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, vehicle payments, child support, etcetera.

For example:

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 calculate pre-qualification numbers with your own financial data, use this Loan Qualifying Calculator.

Just Guidelines

Don't forget these ratios are only guidelines. We'd be thrilled to help you pre-qualify to help you determine how much you can afford.

At Channel Mortgage LLC, we answer questions about qualifying all the time. Give us a call at (718) 639-9500.

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