Debt-to-Income Ratio

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after your other monthly debts have been paid.

About your qualifying ratio

In general, underwriting for conventional loans needs 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 is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything that constitutes the payment.

The second number in the ratio is what percent of your gross income every month that can be spent on housing expenses and recurring debt. Recurring debt includes things like vehicle loans, child support and monthly credit card payments.

Examples:

A 28/36 ratio

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our superb Mortgage Qualifying Calculator.

Just Guidelines

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

At Macon Mortgage, we answer questions about qualifying all the time. Call us: 478-474-4600.