Ratio of Debt to Income

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

How to figure the qualifying ratio

Typically, underwriting for conventional loans needs a qualifying ratio of 28/36. FHA loans are 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 costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that constitutes the full payment.

The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing expenses and recurring debt together. Recurring debt includes payments on credit cards, auto payments, child support, et cetera.

For example:

With 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, please use this Loan Pre-Qualifying Calculator.

Don't forget these are just guidelines. We will be thrilled to help you pre-qualify to help you figure out how large a mortgage you can afford. Metro Mortgage can answer questions about these ratios and many others. Give us a call at 866-300-1550.

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