Debt/Income Ratio

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after your other recurring debts have been paid.


About your qualifying ratio

Most conventional mortgage loans require a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

The first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything that constitutes the payment.

The second number in the ratio is what percent of your gross income every month which can be spent on housing expenses and recurring debt together. Recurring debt includes payments on credit cards, car payments, child support, et cetera.

Examples:

With 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, we offer a Mortgage Loan Pre-Qualification Calculator.

Remember these are only guidelines. We'd be happy to pre-qualify you to help you determine how large a mortgage you can afford. At Leatherstocking Group, Inc., we answer questions about qualifying all the time. Give us a call: 607-547-5007. Want to get started? Apply Online Now.