Ratio of Debt to Income

Your ratio of debt to income is a tool lenders use to calculate how much of your income is available for a monthly mortgage payment after you meet your various other monthly debt payments.

Understanding your qualifying ratio

Usually, underwriting for conventional mortgage loans requires 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 go to housing costs (including principal and interest, private mortgage insurance, hazard insurance, property taxes, and homeowners' association dues).

The second number in the ratio is what percent of your gross income every month which can be spent on housing costs and recurring debt. Recurring debt includes auto loans, child support and monthly 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 calculate pre-qualification numbers on your own income and expenses, feel free to use our superb Mortgage Loan Pre-Qualification Calculator.

Just Guidelines

Remember these are just guidelines. We'd be thrilled to pre-qualify you to help you figure out how large a mortgage loan you can afford.

Abbey Mortgage can walk you through the pitfalls of getting a mortgage. Call us: 352-369-4200.

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