Ratio of Debt to Income

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

Understanding the 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) qualifying ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be spent on housing (this includes principal and interest, PMI, hazard insurance, property tax, and HOA dues).

The second number in the ratio is what percent of your gross income every month which can be spent on housing costs and recurring debt together. Recurring debt includes payments on credit cards, auto/boat loans, child support, and the like.

For example:

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 run your own numbers, please use this Mortgage Pre-Qualification Calculator.

Guidelines Only

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

Prime Capital Mortgage Corp can walk you through the pitfalls of getting a mortgage. Give us a call: 248-644-1200.

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