Ratio of Debt-to-Income

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

About your qualifying ratio

In general, conventional mortgage loans 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 your gross monthly income that can be spent on housing costs (this includes mortgage principal and interest, PMI, homeowner's insurance, property tax, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, car payments, child support, and the like.

For example:

With a 28/36 ratio

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Loan Pre-Qualification Calculator.

Just Guidelines

Remember these ratios are only guidelines. We will be happy to go over pre-qualification to determine how large a mortgage you can afford.

Firelight Mortgage Consultants can walk you through the pitfalls of getting a mortgage. Give us a call at (303) 228-2254.

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