Debt-to-Income Ratio

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

How to figure the qualifying ratio

Most conventional mortgages require a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

For these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything that constitutes the full payment.

The second number in the ratio is what percent of your gross income every month that should be applied to housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, auto/boat loans, child support, and the like.

Some example data:

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'd like to run your own numbers, feel free to use our very useful Loan Qualification Calculator.

Guidelines Only

Remember these ratios are only guidelines. We will be happy to pre-qualify you to help you determine how much you can afford.

Hawk Mortgage Group can walk you through the pitfalls of getting a mortgage. Give us a call: (443) 619-7900.

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