Debt to Income Ratio

The debt to income ratio is a tool lenders use to calculate how much of your income is available for your monthly mortgage payment after you meet your various other monthly debt payments.

About your qualifying ratio

In general, underwriting for conventional mortgages needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (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 that should be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, auto/boat payments, child support, and the like.

For example:

28/36 (Conventional)

• Gross monthly income of $3,500 x .28 = $980 can be applied to housing
• Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
• Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, we offer a Mortgage Loan Qualification Calculator.

Guidelines Only

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

At Not Your Average Lender, we answer questions about qualifying all the time. Give us a call at 9722039033.