Qualification Ratio – 28 / 36 Rule

Calc Qualification 28/36 Rule
5000

The “28/36 rule” is a guideline used by many lenders in the United States to determine the maximum debt-to-income ratios that a borrower can have when applying for a mortgage loan. These ratios are used to assess a borrower’s ability to manage their monthly mortgage payments in relation to their overall financial situation.

Here’s an example to illustrate the 28/36 rule:

Let’s say your gross monthly income is $5,000.

  1. Front-End Ratio: 28% of $5,000 = $1,400. This means your monthly housing expenses, including your mortgage payment, property taxes, homeowner’s insurance, and PMI (if applicable), should not exceed $1,400.
  2. Back-End Ratio: 36% of $5,000 = $1,800. This means your total monthly debt payments, including housing expenses and other debts like car loans and credit card payments, should not exceed $1,800.

EXPLANATION

The first number, “28,” represents the front-end debt-to-income ratio. This ratio considers the percentage of your gross monthly income that can be allocated to housing expenses, including your mortgage payment, property taxes, homeowner’s insurance, and sometimes private mortgage insurance (PMI) if required. So, your housing expenses should not exceed 28% of your gross monthly income.

The second number, “36,” represents the back-end debt-to-income ratio. This ratio takes into account your total debt obligations, including your housing expenses and other monthly debts such as car loans, student loans, credit card payments, and any other recurring debts. Your total debt payments should not exceed 36% of your gross monthly income.

If your proposed mortgage and other debts fall within these guidelines, you may be considered a more qualified borrower in the eyes of many lenders. Keep in mind that different lenders may have slightly different criteria, and some may be willing to make exceptions or use different ratios, so it’s essential to consult with your lender to understand their specific requirements and terms when applying for a mortgage. Additionally, the 28/36 rule is just one aspect of the mortgage approval process, and other factors like credit score, employment history, and down payment amount also play a significant role in the lender’s decision.

Helpful Need To Knows about Mortgages

Tax-Deductible Home Improvements Not to Miss in 2024

Tax-deductible home improvements enhance your living space, increase your home’s value, AND offer potential tax deductions, helping you save money.

10 Essential Tips to Find the Perfect Home for Your Family

Looking for the perfect home for your family? It's like a fun and exciting treasure hunt! But we also know that uncertainty can arise when determining which features to prioritize while also ensuring a wise investment. If you feel this way, you're not alone. Many...

3 Types of Home Improvement Loans

So, you’re thinking about a home renovation project? That’s awesome! But you’re wondering about the financial side of things. We know that choosing the right loan can make a big difference in your renovation journey, whether you’re buying a fixer-upper or looking to finance home improvements for your current home. Therefore, we’ve put together a comprehensive, side-by-side comparison of 3 types of home improvement loans: FHA 203(k), Fannie Mae HomeStyle, and Freddie Mac CHOICERenovation Loans. Importantly, each of these options has its unique benefits and requirements. Ultimately, we aim to simplify your decision-making process, helping you choose the one that aligns best with your renovation goals and financial situation.

Your Complete House Selling Checklist for 2024

Welcome to Property.com's comprehensive Home Selling Checklist designed to easily guide you through each step of the home selling process, from readying your home to closing the sale! Whether you're a first-time seller or a seasoned one, this checklist is for you. As...

Housing Market Trends for 2024

Introduction Hello, future homeowners and seasoned investors. Let's take a closer look at the current state of the U.S. housing market and the housing market trends for 2024. Along the way, we'll also recall the events of 2023 and their potential impact on the future...

SEER and SEER2 FAQs for Florida Homeowners

What is SEER2? Think of SEER2 as the upgraded, smarter cousin of the old SEER rating. It stands for Seasonal Energy Efficiency Ratio, and it’s all about how efficiently your air conditioner keeps you cool without guzzling energy. This new standard, which rolled out in...

Cooking Up a Storm: How to Find a New Home with the Perfect Kitchen

Hello, future homeowners! Isn't it exciting to think about your dream kitchen? A place where you can cook up a storm, enjoy a cup of coffee on a lazy Sunday, or maybe even host your first family Thanksgiving. But how do you find a home with the perfect kitchen? Here...

A Guide to Preventing 18 New Construction Mishaps

Keep your new construction project on track Embarking on a new construction project is an exciting endeavor, whether constructing your dream home, expanding your business, or building an investment property. However, the journey from blueprint to reality can be...

Sustainable and Eco-Friendly Homes

Sustainable and eco-friendly homes are becoming increasingly popular in Fort Lauderdale, as they align with the growing awareness of environmental concerns and a desire for energy efficiency. Here are some features and aspects commonly found in sustainable homes in...

Unlocking Tax and Savings Benefits When Buying a Home

Unlock the tax and savings benefits of buying a home. Our guide makes it easy to understand the financial perks of homeownership!

Navigating the world of mortgages can be less daunting when you have answers to these frequently asked questions.

Keep in mind that mortgage terms and conditions can vary, so it’s crucial to work closely with a qualified mortgage professional to tailor your mortgage to your unique financial situation and homeownership goals