Ratio of Debt to Income

Your ratio of debt to income is a formula lenders use to determine how much of your income is available for your monthly mortgage payment after all your other recurring debt obligations have been fulfilled.

How to figure your qualifying ratio

For the most part, conventional loans need 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.

In these ratios, the first number is the percentage 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.

The second number in the ratio is the maximum percentage of your gross monthly income that should be spent on housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, vehicle loans, child support, etcetera.

Some example data:

28/36 (Conventional)

• Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
• Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
• Gross monthly income of $8,000 x .41 = $3,280 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 Mortgage Loan Pre-Qualifying Calculator.

Just Guidelines

Remember these ratios are only guidelines. We'd be happy to go over pre-qualification to determine how large a mortgage you can afford.

Debbie Oliver NMLS License #248252, America's First Choice Mortgage, NMLS License #279234 can answer questions about these ratios and many others. Give us a call: 2146635355.