Ratio of Debt to Income

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

How to figure your qualifying ratio

Usually, conventional mortgage loans require 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 how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything.

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

Examples:

28/36 (Conventional)

  • 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 want to run your own numbers, use this Mortgage Loan Qualifying Calculator.

Remember these ratios are only guidelines. We'd be thrilled to go over pre-qualification to determine how much you can afford. American Pacific Mortgage can answer questions about these ratios and many others. Call us at (209) 357-7000.

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