Debt-to-Income Ratio

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

How to figure the qualifying ratio

In general, underwriting for conventional mortgage loans needs 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 amount (as a percentage) of your gross monthly income that can be applied to housing costs (including mortgage principal and interest, PMI, homeowner's insurance, property tax, and HOA dues).

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

For example:

A 28/36 qualifying ratio

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, please use this Loan Qualification Calculator.

Just Guidelines

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

At Ward Kilduff Mortgage, we answer questions about qualifying all the time. Give us a call: (860) 658-7100.

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