Ratio of Debt-to-Income

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Your debt to income ratio is a formula lenders use to determine how much money is available for a monthly home loan payment after you meet your other monthly debt payments.

About your qualifying ratio

Usually, conventional mortgages 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.

For these ratios, the first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything.

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

Examples:

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'd like to calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Qualifying Calculator.

Just Guidelines

Remember these ratios are just guidelines. We will be thrilled to go over pre-qualification to help you determine how much you can afford.

Premier Nationwide Lending can answer questions about these ratios and many others. Give us a call: (926) 228-1944.