Debt to Income Ratio

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you've paid your other recurring loans.

How to figure the qualifying ratio

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

In these ratios, the first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything that constitutes the payment.

The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing expenses and recurring debt. Recurring debt includes payments on credit cards, auto loans, 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'd like to run your own numbers, please use this Mortgage Loan Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We'd be thrilled to help you pre-qualify to help you figure out how large a mortgage loan you can afford.

VSI Home Lending can answer questions about these ratios and many others. Give us a call at (260) 338-2561.

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