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 monthly debts are paid.

Understanding the qualifying ratio

Most underwriting for conventional mortgage loans requires a qualifying ratio of approximately 31/45. FHA loans are less strict, requiring a 39/50 ratio, possibly up to 43/55, depending on automated approval findings.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be applied to housing (including loan principal and interest, private mortgage insurance, hazard insurance, property tax, and homeowners' association dues).

The second number is what percent of your gross income every month that should be spent on housing costs and recurring debt together. Recurring debt includes payments on credit cards, auto loans, child support, et cetera.

Some example data:

31/45 (Conventional)

  • Gross monthly income of $8,000 x .31 = $2,480 can be applied to housing
  • Gross monthly income of $8,000 x .45 = $3,600 can be applied to recurring debt plus housing expenses

With a 39/50 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .39 = $3,120 can be applied to housing
  • Gross monthly income of $8,000 x .50 = $4,000 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Loan Qualifying Calculator.

Don't forget these are only guidelines. We'd be thrilled to go over pre-qualification to help you figure out how much you can afford. At Mortgage Solutions of Central Florida, Inc., we answer questions about qualifying all the time. Call us: (407) 294-4707.

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