Debt to Income Ratio

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after you've paid your other recurring debts.

Understanding the qualifying ratio

Typically, conventional mortgage loans need 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 amount (as a percentage) of your gross monthly income that can be applied to housing (this includes loan principal and interest, PMI, hazard insurance, property taxes, and homeowners' association dues).

The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, auto payments, child support, etcetera.

For example:

28/36 (Conventional)

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, we offer a Mortgage Loan Pre-Qualifying Calculator.

Guidelines Only

Remember these are only guidelines. We'd be thrilled to pre-qualify you to determine how large a mortgage loan you can afford.

Triumph Mortgage Inc can answer questions about these ratios and many others. Give us a call: 8327302000.

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