Ratio of Debt-to-Income

Your debt to income ratio is a formula lenders use to calculate how much money is available for a monthly mortgage payment after all your other monthly debts are met.

How to figure the qualifying ratio

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

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

The second number in the ratio is what percent of your gross income every month that should be applied to housing expenses and recurring debt together. Recurring debt includes payments on credit cards, car loans, child support, etcetera.

Examples:

28/36 (Conventional)

  • 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, we offer a Loan Pre-Qualifying Calculator.

Guidelines Only

Remember these ratios are just guidelines. We'd be thrilled to help you pre-qualify to help you figure out how much you can afford.

Homewithloan.com can walk you through the pitfalls of getting a mortgage. Give us a call: 9727982110.


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The Colony, TX 75056