Debt-to-Income Ratio

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

How to figure the qualifying ratio

Most underwriting for conventional loans requires a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

The first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything that constitutes the payment.

The second number is the maximum percentage of your gross monthly income which can be applied to housing expenses and recurring debt. Recurring debt includes things like car payments, child support and monthly credit card payments.

Some example data:

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 run your own numbers, feel free to use our very useful Mortgage Loan Pre-Qualifying Calculator.

Guidelines Only

Remember these ratios are just guidelines. We'd be happy to help you pre-qualify to help you determine how large a mortgage you can afford.

Mario Vega can walk you through the pitfalls of getting a mortgage. Give us a call at 877-310-6200.

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