Debt/Income Ratio

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

About the 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) qualifying ratio.

The first number is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything.

The second number is what percent of your gross income every month that should be applied to housing expenses and recurring debt. Recurring debt includes payments on credit cards, auto/boat loans, child support, etcetera.

Some example data:

A 28/36 ratio

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, use this Mortgage Loan Qualifying Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We will be happy to go over pre-qualification to determine how much you can afford.

First Southeast Mortgage Corporation can answer questions about these ratios and many others. Call us: 954.920.9799.

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