Ratio of Debt to Income

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

Understanding the qualifying ratio

For the most part, 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 percentage of gross monthly income that can go to housing (this includes loan principal and interest, private mortgage insurance, homeowner's insurance, taxes, and HOA dues).

The second number in the ratio is what percent of your gross income every month that can be spent on housing costs and recurring debt. Recurring debt includes things like car 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 with your own financial data, we offer a Mortgage Loan Qualification Calculator.

Just Guidelines

Don't forget these ratios are only guidelines. We will be happy to pre-qualify you to determine how large a mortgage you can afford.

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

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