Ratio of Debt to Income

Your debt to income ratio is a tool lenders use to calculate how much money is available for a monthly mortgage payment after all your other monthly debt obligations are met.

About the qualifying ratio

In general, conventional loans require a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

For 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, homeowners' dues, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month which can be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, car loans, child support, etcetera.

For example:

28/36 (Conventional)

  • 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, please use this Mortgage Loan Qualification Calculator.

Guidelines Only

Don't forget these ratios are only guidelines. We'd be happy to help you pre-qualify to help you determine how large a mortgage you can afford.

Northeast Bancorp of America, Inc. can walk you through the pitfalls of getting a mortgage. Call us at (440) 234-9660.

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