Debt/Income Ratio

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after your other recurring debts have been paid.

How to figure your qualifying ratio

Most conventional mortgage 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 (including mortgage principal and interest, private mortgage insurance, homeowner's insurance, property tax, and HOA dues).

The second number is the maximum percentage of your gross monthly income that should be spent on housing costs and recurring debt together. Recurring debt includes things like car loans, child support and monthly credit card payments.

Examples:

28/36 (Conventional)

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, please use this Mortgage Loan Qualifying Calculator.

Guidelines Only

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

Bright Vision Mortgage can walk you through the pitfalls of getting a mortgage. Call us at (904) 342-3622.

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