Debt to Income Ratio

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after you've paid your other recurring loans.

About your qualifying ratio

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

In these ratios, the first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything that makes up the payment.

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

Examples:

28/36 (Conventional)

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, use this Mortgage Pre-Qualification Calculator.

Guidelines Only

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

Pacific Loan Brokers can walk you through the pitfalls of getting a mortgage. Call us at 877-310-6200.

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