Ratio of Debt to Income

Your ratio of debt to income is a tool lenders use to calculate how much money is available for your monthly mortgage payment after all your other monthly debts are met.

Understanding your qualifying ratio

Most underwriting for conventional loans 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 percentage of gross monthly income that can be applied to housing (this includes principal and interest, PMI, homeowner's insurance, property tax, and homeowners' association dues).

The second number in the ratio is what percent of your gross income every month that should be applied to housing expenses and recurring debt together. Recurring debt includes things like auto/boat loans, child support and monthly credit card payments.

Some example data:

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 want to calculate pre-qualification numbers on your own income and expenses, feel free to use our superb Loan Qualification Calculator.

Guidelines Only

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

1st Credential Mortgage Inc can walk you through the pitfalls of getting a mortgage. Give us a call at (281) 778-0805.

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