Debt-to-Income Ratio

Your ratio of debt to income is a formula lenders use to calculate how much of your income can be used for your monthly mortgage payment after you have met your other monthly debt payments.

About the qualifying ratio

Usually, conventional mortgages need a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can go to housing (including principal and interest, PMI, homeowner's insurance, property tax, and HOA dues).

The second number is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt. Recurring debt includes payments on credit cards, car loans, child support, etcetera.

Examples:

A 28/36 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 calculate pre-qualification numbers with your own financial data, feel free to use our Mortgage Qualification Calculator.

Guidelines Only

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

Forum Mortgage Bancorp can walk you through the pitfalls of getting a mortgage. Call us: (773) 774-9040 Ext 121.

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