Ratio of Debt-to-Income

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

How to figure the qualifying ratio

For the most part, underwriting for conventional mortgages needs 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 in a qualifying ratio is the maximum percentage of gross monthly income that can go to housing (this includes principal and interest, private mortgage insurance, homeowner's insurance, taxes, and homeowners' association dues).

The second number is what percent of your gross income every month which can be applied to housing costs and recurring debt together. Recurring debt includes things like vehicle payments, child support and credit card payments.

For example:

With a 28/36 qualifying ratio

  • 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'd like to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Loan Qualifying Calculator.

Just Guidelines

Don't forget these are just guidelines. We will be happy to go over pre-qualification to help you figure out how large a mortgage loan you can afford.

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

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