Debt/Income Ratio

The debt to income ratio is a formula lenders use to calculate how much money is available for your monthly home loan payment after all your other recurring debt obligations are met.

Understanding the qualifying ratio

Most underwriting for conventional loans needs a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be spent on housing (including principal and interest, private mortgage insurance, homeowner's insurance, taxes, and homeowners' association dues).

The second number is what percent of your gross income every month that should be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, vehicle loans, child support, etcetera.

Examples:

28/36 (Conventional)

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 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 Loan Qualification Calculator.

Just Guidelines

Remember these are only guidelines. We'd be happy to help you pre-qualify to determine how large a mortgage loan 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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