Ratio of Debt to Income

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Lenders use a ratio called “debt to income” to decide the most you can pay monthly after you have paid your other monthly debts.

About your qualifying ratio

Most underwriting for conventional loans 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 percentage of gross monthly income that can be spent on housing (this includes mortgage principal and interest, PMI, homeowner’s insurance, property taxes, and homeowners’ association dues).

The second number is what percent of your gross income every month which can be applied to housing expenses and recurring debt. Recurring debt includes auto/boat loans, child support and monthly credit card payments.

Examples: A 28/36 qualifying ratio

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

Gross monthly income of $2,700 x .29 = $783 can be applied to housing
Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you’d like to run your own numbers, we offer a Mortgage Pre-Qualification Calculator.

Just Guidelines
Don’t forget these are just guidelines. We will be thrilled to pre-qualify you to help you determine how large a mortgage loan you can afford.

At All American Home Mortgage, we answer questions about qualifying all the time. Give us a call at (702) 794-4300.