Debt/Income Ratio

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

About the qualifying ratio

Usually, underwriting for conventional loans requires a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 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, private mortgage insurance, homeowner's insurance, property tax, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income that can be applied to housing expenses and recurring debt. Recurring debt includes things like auto loans, child support and credit card payments.

Examples:

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 want to calculate pre-qualification numbers with your own financial data, we offer a Loan Qualification Calculator.

Just Guidelines

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

Homewithloan.com can walk you through the pitfalls of getting a mortgage. Call us at 9727982110.


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4815 State Hwy 121 Suite 2
The Colony, TX 75056