Ratio of Debt to Income

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Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other monthly debts are paid.

About your qualifying ratio

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

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can go to housing (this includes principal and interest, PMI, hazard insurance, taxes, and homeowners' association dues).

The second number is what percent of your gross income every month that can be spent on housing expenses and recurring debt. Recurring debt includes things like auto payments, child support and 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 run your own numbers, use this Loan Qualification Calculator.

Don't forget these ratios are just guidelines. We'd be happy to help you pre-qualify to help you figure out how much you can afford. Mason Mortgage Advisors can answer questions about these ratios and many others. Give us a call: (314) 395-8300.

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