Debt to Income Ratio

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after your other monthly debts have been paid.

Understanding your qualifying ratio

Usually, conventional mortgages require a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

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 hazard insurance, homeowners' dues, Private Mortgage Insurance - everything that constitutes the payment.

The second number is what percent of your gross income every month which can be applied to housing expenses and recurring debt. Recurring debt includes things like vehicle payments, child support and monthly credit card payments.

Some example data:

With a 28/36 ratio

• 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 calculate pre-qualification numbers on your own income and expenses, feel free to use our very useful Loan Qualification Calculator.

Just Guidelines

Remember these are only guidelines. We will be thrilled to go over pre-qualification to help you figure out how much you can afford.

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