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.

How to figure the qualifying ratio

Most conventional 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) qualifying ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be applied to housing (including principal and interest, private mortgage insurance, homeowner's insurance, taxes, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto/boat loans, child support, and the like.

Examples:

28/36 (Conventional)

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, use this Mortgage Loan Pre-Qualification Calculator.

Just Guidelines

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

Universal Lending Services, Inc. can walk you through the pitfalls of getting a mortgage. Call us: (337) 264-9990.

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