Ratio of Debt to Income

Your ratio of debt to income is a formula lenders use to determine how much of your income is available for a monthly home loan payment after all your other monthly debt obligations have been fulfilled.

Understanding the qualifying ratio

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

In these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything that makes up the payment.

The second number is the maximum percentage of your gross monthly income that should be spent on housing expenses and recurring debt. For purposes of this ratio, debt includes credit card payments, vehicle loans, child support, and the like.

For example:

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 run your own numbers, feel free to use our superb Loan Qualification Calculator.

Just Guidelines

Don't forget these are only guidelines. We'd be happy to help you pre-qualify to help you determine how much you can afford.

Abbey Mortgage can answer questions about these ratios and many others. Give us a call: 352-369-4200.

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