Ratio of Debt-to-Income

Your debt to income ratio is a formula lenders use to calculate how much money is available for your monthly home loan payment after you meet your various other monthly debt payments.

About your qualifying ratio

Most conventional loans need 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 percentage of your gross monthly income that can be spent on housing costs (including loan principal and interest, private mortgage insurance, hazard insurance, property tax, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing expenses and recurring debt. Recurring debt includes auto/boat payments, child support and credit card payments.

Examples:

A 28/36 ratio

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, feel free to use our superb Mortgage Loan Qualifying Calculator.

Guidelines Only

Remember these are only guidelines. We'd be thrilled to pre-qualify you to determine how large a mortgage loan 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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