Debt-to-Income Ratio

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

About your qualifying ratio

Most conventional mortgages require 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 spent on housing (this includes mortgage principal and interest, PMI, hazard insurance, property taxes, and HOA dues).

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

Examples:

With a 28/36 ratio

  • 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'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We'd be happy to pre-qualify you to help you figure out how much you can afford.

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

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