Debt-to-Income Ratio

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

About 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) qualifying ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can go to housing costs (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. Recurring debt includes auto/boat payments, child support and monthly credit card payments.

For example:

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'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our very useful Loan Pre-Qualification Calculator.

Guidelines Only

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

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