Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after your other monthly debts are paid.

How to figure the qualifying ratio

Usually, underwriting for conventional loans needs 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 hazard 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 spent on housing expenses and recurring debt together. Recurring debt includes payments on credit cards, car loans, child support, and the like.

Some example data:

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 on your own income and expenses, we offer a Mortgage Qualification Calculator.

Just Guidelines

Remember these are just guidelines. We'd be thrilled to go over pre-qualification to determine how much you can afford.

AmeriBest Mortgage can answer questions about these ratios and many others. Call us at (321) 777-7277.

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