Debt-to-Income Ratio

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

About the qualifying ratio

In general, underwriting for conventional loans requires 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 is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing costs and recurring debt together. Recurring debt includes credit card payments, vehicle payments, child support, et cetera.

Examples:

With 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, use this Mortgage Pre-Qualifying Calculator.

Don't forget these ratios are only guidelines. We will be happy to go over pre-qualification to help you determine how much you can afford. The Ross Fund can answer questions about these ratios and many others. Give us a call at (949) 533-5311.

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