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Ratio of Debt-to-Income

The debt to income ratio is a tool lenders use to calculate how much money can be used for a monthly mortgage payment after you meet your various other monthly debt payments.

About the qualifying ratio

Most conventional mortgages require a qualifying ratio of 28/36. FHA loans are 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 hazard insurance, homeowners' dues, PMI - everything.

The second number is the maximum percentage of your gross monthly income that should be applied to housing expenses and recurring debt. Recurring debt includes things like auto payments, child support and monthly credit card payments.

Some example data:

With a 28/36 qualifying ratio

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Qualifying Calculator.

Guidelines Only

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

Town & Country Home Loans, Inc. can answer questions about these ratios and many others. Call us: (760)789-9995.

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