Debt to Income Ratio

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

How to figure your qualifying ratio

Usually, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything.

The second number is the maximum percentage of your gross monthly income which can be spent on housing expenses and recurring debt together. Recurring debt includes vehicle loans, child support and monthly credit card payments.

Some example data:

With 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 run your own numbers, feel free to use our Loan Qualifying Calculator.

Just Guidelines

Don't forget these are only guidelines. We will be thrilled to help you pre-qualify to determine how much you can afford.

At Saltwater Funding, Inc., we answer questions about qualifying all the time. Give us a call at 386-246-6322.

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