# Debt/Income Ratio

The ratio of debt to income is a formula lenders use to determine how much money can be used for your monthly home loan payment after you have met your other monthly debt payments.

In general, conventional loans require a qualifying ratio of 28/36. FHA loans are less strict, 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 (including loan principal and interest, PMI, homeowner's 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 expenses and recurring debt. Recurring debt includes payments on credit cards, auto/boat payments, child support, etcetera.

### Examples:

28/36 (Conventional)

• Gross monthly income of \$3,500 x .28 = \$980 can be applied to housing
• Gross monthly income of \$3,500 x .36 = \$1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of \$3,500 x .29 = \$1,015 can be applied to housing
• Gross monthly income of \$3,500 x .41 = \$1,435 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, feel free to use our superb Mortgage Qualification Calculator.

### Just Guidelines

Remember these ratios are only guidelines. We will be happy to help you pre-qualify to help you determine how much you can afford.

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