Ratio of Debt to Income

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Lenders use a ratio called "debt to income" to determine the most you can pay monthly after you've paid your other monthly loans.

Understanding the qualifying ratio

For the most part, underwriting for conventional 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 in a qualifying ratio is the maximum percentage of your gross monthly income that can be applied to housing costs (including loan principal and interest, PMI, homeowner's insurance, property tax, and homeowners' association dues).

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

For example:

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 with your own financial data, I offer a Mortgage Loan Qualifying Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. I'd be happy to pre-qualify you to determine how large a mortgage loan you can afford.

I answer questions about qualifying all the time. Give me a call at (619) 758-4035.