Ratio of Debt-to-Income

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The debt to income ratio is a formula lenders use to determine how much of your income is available for a monthly mortgage payment after you meet your other monthly debt payments.

How to figure the qualifying ratio

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

For these ratios, the first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything that constitutes the payment.

The second number is the maximum percentage of your gross monthly income that can be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, auto payments, child support, and the like.

Examples:

28/36 (Conventional)

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

Remember these are just guidelines. We'd be happy to help you pre-qualify to help you figure out how much you can afford. At Bancmart Mortgage Network, Inc., we answer questions about qualifying all the time. Call us at (773) 205-2323.

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