Ratio of Debt to Income

The ratio of debt to income is a tool lenders use to determine how much of your income is available for a monthly mortgage payment after you have met your various other monthly debt payments.

How to figure the qualifying ratio

Typically, conventional mortgages need a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

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

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 credit card payments, car payments, child support, etcetera.

Examples:

A 28/36 qualifying ratio

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Pre-Qualification Calculator.

Just Guidelines

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

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

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