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

In general, underwriting for conventional mortgages requires 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 in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can go to housing costs (this includes principal and interest, private mortgage insurance, hazard insurance, property tax, and homeowners' association dues).

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

Examples:

With a 28/36 qualifying ratio

• 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 on your own income and expenses, please use this Loan Qualification Calculator.

Guidelines Only

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

Not Your Average Lender can answer questions about these ratios and many others. Call us at 9722039033.