Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after you've paid your other monthly debts.

How to figure your qualifying ratio

Usually, conventional loans 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 go toward housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything that makes up the full payment.

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

For example:

With a 28/36 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 want to calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Qualification Calculator.

Guidelines Only

Remember these ratios are just guidelines. We'd be happy to pre-qualify you to determine how large a mortgage loan you can afford.

VSI Home Lending can walk you through the pitfalls of getting a mortgage. Call us: (260) 338-2561.

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