Ratio of Debt-to-Income

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

Understanding the qualifying ratio

Most underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

The first number is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything.

The second number is what percent of your gross income every month that should be applied to housing expenses and recurring debt. For purposes of this ratio, debt includes credit card payments, car loans, child support, etcetera.

Examples:

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'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our Mortgage Qualification Calculator.

Just Guidelines

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

Not Your Average Lender can walk you through the pitfalls of getting a mortgage. Give us a call at 9722039033.