Ratio of Debt-to-Income

The ratio of debt to income is a formula lenders use to calculate how much of your income is available for your monthly home loan payment after you have met your other monthly debt payments.

Understanding your qualifying ratio

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

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can go to housing costs (including mortgage principal and interest, PMI, hazard insurance, property tax, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt together. Recurring debt includes things like car loans, child support and monthly credit card payments.

Examples:

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 with your own financial data, we offer a Loan Pre-Qualification Calculator.

Guidelines Only

Don't forget these are just guidelines. We will be thrilled to pre-qualify you to help you figure out how large a mortgage you can afford.

At Homewithloan.com, we answer questions about qualifying all the time. Give us a call: 972.798.2110.


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