Ratio of Debt-to-Income

The debt to income ratio is a tool lenders use to calculate how much money is available for your monthly home loan payment after all your other monthly debts have been fulfilled.

How to figure your qualifying ratio

Usually, underwriting for conventional mortgages requires 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 gross monthly income that can go to housing (this includes loan principal and interest, private mortgage insurance, homeowner's insurance, property tax, and HOA dues).

The second number is what percent of your gross income every month that should be spent on housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, auto loans, child support, etcetera.

For example:

With a 28/36 ratio

• Gross monthly income of $3,500 x .28 = $980 can be applied to housing
• Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
• Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, we offer a Loan Qualification Calculator.

Just Guidelines

Don't forget these are just guidelines. We will be thrilled to help you pre-qualify to help you figure out how large a mortgage loan you can afford.

Bob Rutledge Mortgage can walk you through the pitfalls of getting a mortgage. Call us at 3149139678.