Ratio of Debt to Income

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

How to figure your qualifying ratio

For the most part, underwriting for conventional loans requires a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

The first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything.

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 things like auto loans, child support and monthly credit card payments.

Some example data:

28/36 (Conventional)

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, we offer a Mortgage Loan Qualification Calculator.

Remember these are just guidelines. We will be thrilled to help you pre-qualify to determine how large a mortgage loan you can afford. Carolina Equity Services, Inc. can walk you through the pitfalls of getting a mortgage. Call us at (919) 355-1034.