Ratio of Debt-to-Income

The debt to income ratio is a formula lenders use to calculate how much of your income can be used for a monthly home loan payment after all your other recurring debt obligations are met.

Understanding the qualifying ratio

Usually, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

In these ratios, 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 homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything.

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

Some example data:

A 28/36 qualifying ratio

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, feel free to use our superb Mortgage Qualification Calculator.

Guidelines Only

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

C2 Financial Corporation can walk you through the pitfalls of getting a mortgage. Give us a call: (727) 478-2797.

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