Ratio of Debt to Income

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

About the qualifying ratio

Most conventional loans require a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can go to housing (this includes principal and interest, private mortgage insurance, hazard insurance, taxes, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income that should be spent on housing expenses and recurring debt. Recurring debt includes credit card payments, auto payments, child support, etcetera.

Examples:

28/36 (Conventional)

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, use this Mortgage Loan Qualifying Calculator.

Guidelines Only

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

Refresh Funding can walk you through the pitfalls of getting a mortgage. Give us a call at 305-800-3863.

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