Debt-to-Income Ratio

The debt to income ratio is a formula lenders use to determine how much of your income can be used for a monthly mortgage payment after you meet your various other monthly debt payments.

Understanding the qualifying ratio

In general, conventional mortgages require a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything.

The second number in the ratio is the maximum percentage of your gross monthly income that should be applied to housing expenses and recurring debt. Recurring debt includes auto/boat loans, child support and credit card payments.

Some example data:

28/36 (Conventional)

  • 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 with your own financial data, use this Loan Qualifying Calculator.

Just Guidelines

Don't forget these are only guidelines. We'd be happy to help you pre-qualify to help you figure out how much you can afford.

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

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