Ratio of Debt-to-Income

Your ratio of debt to income is a tool lenders use to determine how much money can be used for your monthly home loan payment after all your other monthly debts have been fulfilled.

Understanding the qualifying ratio

Most underwriting for conventional mortgages needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

In these ratios, 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 hazard insurance, homeowners' dues, PMI - everything that makes up the full payment.

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 auto/boat loans, child support and monthly credit card payments.

Examples:

A 28/36 qualifying 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 want to run your own numbers, we offer a Mortgage Pre-Qualifying Calculator.

Just Guidelines

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

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

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