Ratio of Debt to Income

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Your ratio of debt to income is a formula lenders use to calculate how much money can be used for a monthly mortgage payment after you meet your various other monthly debt payments.

How to figure the qualifying ratio

In general, 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) qualifying ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be applied to housing costs (this includes loan principal and interest, PMI, hazard insurance, property tax, and HOA dues).

The second number in the ratio is what percent of your gross income every month that should be applied to housing costs and recurring debt together. Recurring debt includes things like car payments, child support and credit card payments.

Examples:

28/36 (Conventional)

  • 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 run your own numbers, we offer a Mortgage Pre-Qualification Calculator.

Don't forget these are only guidelines. We will be happy to go over pre-qualification to determine how much you can afford. Bliss Mortgage LLC can answer questions about these ratios and many others. Call us at 813-966-1888.

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