Ratio of Debt to Income

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other recurring debts are paid.

How to figure the qualifying ratio

For the most part, conventional mortgages need 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, HOA dues, Private Mortgage Insurance - everything that makes up the payment.

The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing costs and recurring debt. Recurring debt includes auto/boat payments, child support and monthly credit card payments.

Examples:

With a 28/36 qualifying ratio

  • 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, feel free to use our very useful Mortgage Loan Qualification Calculator.

Guidelines Only

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

At Bob Rutledge Mortgage, we answer questions about qualifying all the time. Give us a call: 3149139678.

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Bob Rutledge Mortgage

Loan Officer NMLS#: 297044

New American Funding 12321 Olive Blvd, ste 150
St. Louis, MO 63141