Ratio of Debt to Income

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

About your qualifying ratio

Usually, underwriting for conventional mortgages needs 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 (this includes principal and interest, private mortgage insurance, homeowner's insurance, property taxes, and homeowners' association dues).

The second number is what percent of your gross income every month which can be applied to housing costs and recurring debt. Recurring debt includes things like car payments, child support and monthly credit card payments.

Some example data:

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'd like to run your own numbers, feel free to use our very useful Mortgage Pre-Qualifying Calculator.

Guidelines Only

Remember these ratios are only guidelines. We will be happy to go over pre-qualification to determine how much you can afford.

Sharp Mortgages, Inc. can walk you through the pitfalls of getting a mortgage. Give us a call: 904-997-1093.