Debt-to-Income Ratio

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

Understanding your qualifying ratio

Usually, conventional mortgages require a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 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 (this includes loan principal and interest, PMI, hazard insurance, property taxes, and HOA dues).

The second number is the maximum percentage of your gross monthly income that should be applied to housing expenses and recurring debt. Recurring debt includes things like auto payments, child support and credit card payments.

Examples:

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'd like to run your own numbers, we offer a Mortgage Qualification Calculator.

Just Guidelines

Don't forget these ratios are only guidelines. We'd be happy to help you pre-qualify to help you figure out how large a mortgage you can afford.

F&T Mortgage, Inc. NMLS # 168839 (www.nmlsconsumeraccess.org) can walk you through the pitfalls of getting a mortgage. Give us a call: 214-300-8756.



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