Debt/Income Ratio

The debt to income ratio is a tool lenders use to calculate how much of your income can be used for a monthly home loan payment after all your other monthly debt obligations have been fulfilled.

How to figure the qualifying ratio

Most underwriting for conventional mortgages needs a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can go to housing (this includes principal and interest, PMI, hazard insurance, property tax, and HOA dues).

The second number in the ratio is what percent of your gross income every month that can be spent on housing costs and recurring debt together. Recurring debt includes things like vehicle payments, child support and credit card payments.

Examples:

With a 28/36 qualifying ratio

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, we offer a Mortgage Loan Pre-Qualification Calculator.

Just Guidelines

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

At Nationwide Home Loans, we answer questions about qualifying all the time. Call us at (562) 693-5048.

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