Ratio of Debt to Income

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after your other recurring debts are paid.

How to figure your qualifying ratio

Typically, underwriting for conventional mortgages needs a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be spent on housing (including principal and interest, PMI, homeowner's insurance, property tax, and HOA dues).

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

Examples:

A 28/36 ratio

• 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 with your own financial data, feel free to use our very useful Mortgage Pre-Qualification Calculator.

Guidelines Only

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

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