Debt to Income Ratio

Your debt to income ratio is a formula lenders use to calculate how much of your income can be used for a monthly home loan payment after you have met your various other monthly debt payments.

How to figure 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.

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be spent on housing costs (including mortgage principal and interest, PMI, hazard insurance, property tax, and HOA dues).

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 things like auto payments, child support and monthly credit card payments.

For example:

With a 28/36 qualifying 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, we offer a Mortgage Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We'd be happy to pre-qualify you to help you figure out how much you can afford.

Mortgage Headquarters of Missouri, Inc can answer questions about these ratios and many others. Call us at 5733029990.

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Mortgage Headquarters of Missouri, Inc

4824 Osage Beach PKWY Suite 1
Osage Beach, MO 65065