Debt-to-Income Ratio

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

How to figure the qualifying ratio

In general, underwriting for conventional mortgage loans requires a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

The first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month that should be applied to housing expenses and recurring debt together. Recurring debt includes payments on credit cards, vehicle payments, child support, and the like.

Examples:

28/36 (Conventional)

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, use this Mortgage Qualification Calculator.

Just Guidelines

Remember these ratios are just guidelines. We will be thrilled to go over pre-qualification to help you determine how much you can afford.

At Statewide Funding, we answer questions about qualifying all the time. Give us a call at (415) 456-7802.

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