Debt to Income Ratio

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The debt to income ratio is a tool lenders use to calculate how much of your income is available for your monthly mortgage payment after all your other recurring debts are met.

Understanding your qualifying ratio

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

For these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything that constitutes the full payment.

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 credit card payments, vehicle loans, child support, et cetera.

Some example data:

With a 28/36 ratio

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 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 Mortgage Loan Qualifying Calculator.

Don't forget these are only guidelines. We will be happy to pre-qualify you to help you figure out how much you can afford. Keypoint Mortgage can walk you through the pitfalls of getting a mortgage. Call us: 201-998-9050.

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