Ratio of Debt-to-Income

Your debt to income ratio is a tool lenders use to calculate how much money can be used for a monthly home loan payment after you have met your various other monthly debt payments.

How to figure the qualifying ratio

Most conventional loans require a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be spent on housing (this includes principal and interest, private mortgage insurance, hazard insurance, property tax, and HOA dues).

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

For example:

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 calculate pre-qualification numbers with your own financial data, we offer a Mortgage Qualification Calculator.

Guidelines Only

Don't forget these are only guidelines. We'd be thrilled to go over pre-qualification to determine how much you can afford.

Not Your Average Lender can walk you through the pitfalls of getting a mortgage. Call us: 9722039033.