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've paid your other monthly loans.

About your qualifying ratio

For the most part, 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) ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can go to housing costs (including mortgage principal and interest, PMI, homeowner's insurance, taxes, and HOA dues).

The second number is what percent of your gross income every month that can be spent on housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, vehicle loans, child support, et cetera.

Some example data:

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'd like to run your own numbers, please use this Mortgage Loan Pre-Qualification Calculator.

Remember these are just guidelines. We'd be happy to pre-qualify you to determine how much you can afford. At Southwest Funding, we answer questions about qualifying all the time. Call us: (504) 832-3131.

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