Debt/Income Ratio

The ratio of debt to income is a formula lenders use to calculate how much money is available for your monthly mortgage payment after you have met your other monthly debt payments.

Understanding your qualifying ratio

Usually, conventional mortgage loans require 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 is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number in the ratio is what percent of your gross income every month that can be spent on 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 $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, we offer a Mortgage Pre-Qualification Calculator.

Just Guidelines

Remember these ratios are only guidelines. We'd be thrilled to go over pre-qualification to help you determine how large a mortgage you can afford.

Bob Rutledge Mortgage can walk you through the pitfalls of getting a mortgage. Give us a call: 3149139678.