Debt-to-Income Ratio

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other recurring debts are paid.

Understanding your qualifying ratio

Typically, conventional mortgages need a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be applied to housing (this includes mortgage principal and interest, PMI, hazard insurance, property tax, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income that can be applied to housing expenses and recurring debt. Recurring debt includes vehicle loans, child support and credit card payments.

Examples:

With a 28/36 ratio

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our very useful Mortgage Pre-Qualifying Calculator.

Just Guidelines

Remember these ratios are only guidelines. We will be thrilled to pre-qualify you to help you figure out how large a mortgage loan you can afford.

At Rick Brown, Elite Financing Group, we answer questions about qualifying all the time. Call us at 5122791520.

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Rick Brown, Elite Financing Group

RMLO NMLS #279018 Company NMLS #212369

RMLO NMLS #279018 Company NMLS #212369 3415 Greystone Drive Suite 205
Austin, TX 78731