Debt to Income Ratio

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

Understanding your qualifying ratio

In general, 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 go to housing (including loan principal and interest, PMI, hazard insurance, taxes, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income that should be spent on housing expenses and recurring debt. Recurring debt includes payments on credit cards, vehicle loans, child support, et cetera.

For example:

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'd like to run your own numbers, feel free to use our Mortgage Qualifying Calculator.

Remember these are just guidelines. We'd be happy to go over pre-qualification to determine how much you can afford. The Mortgage Network can walk you through the pitfalls of getting a mortgage. Give us a call at (303) 993-6358.

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