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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 loans.

About the qualifying ratio

In general, conventional loans need a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be spent on housing costs (this includes mortgage principal and interest, PMI, hazard insurance, property tax, and homeowners' association dues).

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

For example:

A 28/36 ratio

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our Loan Qualification Calculator.

Guidelines Only

Don't forget these ratios are only guidelines. We will be thrilled to pre-qualify you to help you determine how much you can afford.

Greystone Loans, Inc. can answer questions about these ratios and many others. Give us a call: (909) 467-1090.

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