Debt/Income Ratio

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

How to figure the qualifying ratio

Usually, underwriting for conventional loans needs a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

In these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything that constitutes the full payment.

The second number in the ratio is what percent of your gross income every month which can be applied to housing costs and recurring debt. Recurring debt includes car payments, child support and monthly credit card payments.

Examples:

28/36 (Conventional)

• Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
• Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
• Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, please use this Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

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

Not Your Average Lender can answer questions about these ratios and many others. Give us a call: 9722039033.