Ratio of Debt-to-Income

The ratio of debt to income is a formula lenders use to determine how much of your income can be used for a monthly mortgage payment after all your other recurring debt obligations have been fulfilled.

Understanding the qualifying ratio

For the most part, underwriting for conventional mortgages requires 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 be spent on housing costs (this includes loan principal and interest, private mortgage insurance, hazard insurance, taxes, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income that should be spent on housing costs and recurring debt. Recurring debt includes payments on credit cards, auto/boat payments, child support, etcetera.

For example:

With a 28/36 ratio

  • 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 want to run your own numbers, feel free to use our superb Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

Remember these ratios are only guidelines. We'd be happy to go over pre-qualification to help you figure out how much you can afford.

Nationwide Home Loans can answer questions about these ratios and many others. Call us: 5626935048.

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Whittier, CA 90602-3760