Ratio of Debt-to-Income

The debt to income ratio is a tool lenders use to determine how much money can be used for a monthly home loan payment after you meet your other monthly debt payments.

Understanding your qualifying ratio

Most conventional loans require a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be applied to housing costs (this includes loan principal and interest, PMI, hazard insurance, taxes, and HOA dues).

The second number is what percent of your gross income every month that can be applied to housing costs and recurring debt together. Recurring debt includes things like vehicle loans, child support and monthly credit card payments.

For example:

A 28/36 qualifying 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 run your own numbers, use this Mortgage Loan Qualifying Calculator.

Just Guidelines

Remember these are just guidelines. We'd be happy to go over pre-qualification to determine how much you can afford.

At VSI Home Lending, we answer questions about qualifying all the time. Call us: 2603382561.

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