Debt/Income Ratio
The debt to income ratio is a formula lenders use to determine how much of your income is available for a monthly mortgage payment after all your other monthly debts are met.
How to figure the qualifying ratio
Usually, underwriting for conventional mortgage 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 go to housing costs (including principal and interest, PMI, homeowner's insurance, property tax, and HOA dues).
The second number in the ratio is the maximum percentage of your gross monthly income that should be applied to housing expenses and recurring debt. For purposes of this ratio, debt includes payments on credit cards, vehicle payments, child support, etcetera.
For example:
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 run your own numbers, feel free to use our very useful Loan Pre-Qualifying Calculator.
Guidelines Only
Remember these ratios are just guidelines. We'd be thrilled to pre-qualify you to determine how large a mortgage you can afford.
At MortgageZ LLC, we answer questions about qualifying all the time. Give us a call at 8557558700.