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.

About the qualifying ratio

For the most part, conventional mortgage loans 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 your gross monthly income that can be applied to housing (this includes principal and interest, PMI, hazard insurance, property tax, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income which can be spent on housing expenses and recurring debt. Recurring debt includes things like auto loans, child support and monthly credit card payments.

For example:

28/36 (Conventional)

  • 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 want to calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Qualification Calculator.

Guidelines Only

Don't forget these are only guidelines. We will be thrilled to go over pre-qualification to help you determine how much you can afford.

Homewood Mortgage, Inc. can answer questions about these ratios and many others. Give us a call at 205-941-1484.

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