Debt to Income Ratio

The ratio of debt to income is a tool lenders use to calculate how much money is available for a monthly home loan payment after all your other monthly debt obligations have been fulfilled.

About your qualifying ratio

Usually, 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 gross monthly income that can be applied to housing costs (including loan principal and interest, PMI, hazard insurance, taxes, and HOA dues).

The second number is what percent of your gross income every month that can be spent on housing costs and recurring debt. Recurring debt includes credit card payments, car loans, child support, and the like.

Some example data:

A 28/36 qualifying ratio

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, we offer a Loan Qualification Calculator.

Guidelines Only

Remember these are just guidelines. We will be happy to pre-qualify you to help you determine how large a mortgage you can afford.

Prime Capital Mortgage Corp can answer questions about these ratios and many others. Give us a call: 248-644-1200.

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