Debt to Income Ratio

The debt to income ratio is a formula lenders use to determine how much of your income can be used for your monthly home loan payment after you have met your other monthly debt payments.

Understanding the qualifying ratio

In general, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything that constitutes the payment.

The second number in the ratio is the maximum percentage of your gross monthly income that should be applied to housing expenses and recurring debt. For purposes of this ratio, debt includes credit card payments, car payments, child support, etcetera.

Some example data:

28/36 (Conventional)

  • 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 run your own numbers, feel free to use our Mortgage Loan Qualifying Calculator.

Just Guidelines

Don't forget these are just guidelines. We will be thrilled to help you pre-qualify to help you figure out how much you can afford.

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

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