Ratio of Debt to Income

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

Understanding your qualifying ratio

Usually, underwriting for conventional mortgage loans requires 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.

In these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything.

The second number is the maximum percentage of your gross monthly income which can be applied to housing expenses and recurring debt. For purposes of this ratio, debt includes payments on credit cards, auto/boat loans, child support, etcetera.

For example:

With a 28/36 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'd like to calculate pre-qualification numbers with your own financial data, feel free to use our Mortgage Loan Qualifying Calculator.

Just Guidelines

Remember these are only guidelines. We'd be thrilled to pre-qualify you to help you determine how large a mortgage you can afford.

Ward Kilduff Mortgage can walk you through the pitfalls of getting a mortgage. Call us: (860) 658-7100.

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