Debt-to-Income Ratio

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

About the qualifying ratio

For the most part, underwriting for conventional mortgages needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be applied to housing costs (including mortgage principal and interest, PMI, homeowner's insurance, property taxes, and homeowners' association dues).

The second number is what percent of your gross income every month which can be applied to housing expenses and recurring debt. Recurring debt includes auto/boat payments, child support and credit card payments.

Examples:

28/36 (Conventional)

  • 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 on your own income and expenses, we offer a Loan Qualification Calculator.

Guidelines Only

Don't forget these are only guidelines. We will be happy to help you pre-qualify to determine how much you can afford.

At 1st Credential Mortgage Inc, we answer questions about qualifying all the time. Call us at (281) 778-0805.

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