Debt to Income Ratio

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

About your qualifying ratio

In general, underwriting for conventional loans needs 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 in a qualifying ratio is the maximum percentage of gross monthly income that can be spent on housing costs (including loan principal and interest, PMI, hazard insurance, property tax, and homeowners' association dues).

The second number is what percent of your gross income every month that should be applied to housing costs and recurring debt together. Recurring debt includes auto/boat payments, child support and monthly credit card payments.

Examples:

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 calculate pre-qualification numbers with your own financial data, feel free to use our very useful Mortgage Loan Qualification Calculator.

Just Guidelines

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

Acceptance Capital Mortgage Corporation can answer questions about these ratios and many others. Call us: (337) 453-0012.

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