Debt-to-Income Ratio

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

About the qualifying ratio

For the most part, 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.

In these ratios, 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, homeowners' dues, PMI - everything that makes up the payment.

The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing costs and recurring debt together. Recurring debt includes things like car loans, child support and credit card payments.

Some example data:

With a 28/36 qualifying 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 want to run your own numbers, feel free to use our very useful Loan Pre-Qualification Calculator.

Just Guidelines

Don't forget these are only guidelines. We'd be happy to go over pre-qualification to help you determine how much you can afford.

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