Ratio of Debt-to-Income

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

Understanding the qualifying ratio

For the most part, conventional mortgage loans require a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

For these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that constitutes the payment.

The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing costs and recurring debt. Recurring debt includes car loans, child support and credit card payments.

Examples:

With a 28/36 qualifying ratio

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, we offer a Loan Qualifying Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We will be thrilled to pre-qualify you to help you figure out how much you can afford.

Financial Edge Mortgage Corp. can walk you through the pitfalls of getting a mortgage. Call us: 425-508-9988.

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