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.

Understanding your qualifying ratio

Most conventional mortgages need a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can go to housing costs (including loan principal and interest, private mortgage insurance, hazard insurance, property tax, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income that should be spent on housing costs and recurring debt together. Recurring debt includes things like car payments, child support and monthly credit card payments.

Some example data:

With a 28/36 ratio

  • 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'd like to calculate pre-qualification numbers on your own income and expenses, use this Loan Pre-Qualifying Calculator.

Just Guidelines

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

Crown Mortgage can answer questions about these ratios and many others. Give us a call: (434) 975-5626.

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