Debt-to-Income Ratio

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

Understanding your qualifying ratio

For the most part, conventional 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 (including mortgage 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 which can be applied to housing expenses and recurring debt. Recurring debt includes payments on credit cards, auto/boat payments, child support, and the like.

For example:

A 28/36 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 want to calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Pre-Qualifying Calculator.

Guidelines Only

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

At Prosperity Co. dba Prosperity Mortgage Co., we answer questions about qualifying all the time. Give us a call at (630) 305-9207.