Debt/Income Ratio

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

How to figure your qualifying ratio

Usually, conventional loans need 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 is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that makes up the full payment.

The second number is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt together. Recurring debt includes credit card payments, car loans, child support, etcetera.

For example:

28/36 (Conventional)

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

Just Guidelines

Don't forget these ratios are only guidelines. We'd be happy to help you pre-qualify to determine how large a mortgage loan you can afford.

Saab Mortgage can answer questions about these ratios and many others. Call us: 703-288-0777.

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