Ratio of Debt-to-Income

Your ratio of debt to income is a formula lenders use to calculate how much money is available for your monthly home loan payment after all your other recurring debt obligations are fulfilled.

About the qualifying ratio

In general, conventional loans need a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 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 homeowners' insurance, HOA dues, Private Mortgage Insurance - everything.

The second number is the maximum percentage of your gross monthly income which can be applied to housing costs and recurring debt. Recurring debt includes auto/boat payments, child support and monthly credit card payments.

Examples:

With a 28/36 qualifying ratio

  • 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 want to run your own numbers, feel free to use our very useful Loan Qualification Calculator.

Just Guidelines

Don't forget these are just guidelines. We'd be thrilled to help you pre-qualify to determine how large a mortgage loan 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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