Ratio of Debt to Income

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Your ratio of debt to income is a formula lenders use to calculate how much of your income is available for your monthly home loan payment after all your other monthly debt obligations have been met.

How to figure the qualifying ratio

In general, underwriting for conventional mortgage loans requires 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 in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be spent on housing (including mortgage principal and interest, PMI, homeowner's insurance, property tax, and HOA dues).

The second number is what percent of your gross income every month that can be applied to housing costs and recurring debt. Recurring debt includes credit card payments, auto/boat payments, child support, et cetera.

Examples:

A 28/36 ratio

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, please use this Mortgage Qualification Calculator.

Don't forget these are only guidelines. We'd be thrilled to pre-qualify you to determine how much you can afford. Mortgage X-Change can walk you through the pitfalls of getting a mortgage. Give us a call at 214-383-9400.

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