Ratio of Debt-to-Income

The ratio of debt to income is a formula lenders use to calculate how much money can be used for your monthly home loan payment after you have met your other monthly debt payments.

About your qualifying ratio

Typically, conventional mortgage loans require a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

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

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

For example:

28/36 (Conventional)

• Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
• Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
• Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, use this Mortgage Pre-Qualification Calculator.

Guidelines Only

Remember these ratios are only guidelines. We will be happy to pre-qualify you to help you determine how much you can afford.

Bob Rutledge Mortgage can answer questions about these ratios and many others. Call us: 3149139678.