Ratio of Debt to Income

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after you've paid your other recurring debts.

How to figure your qualifying ratio

In general, conventional loans require a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 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 costs (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 together. Recurring debt includes car payments, child support and monthly credit card payments.

For example:

A 28/36 qualifying 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'd like to calculate pre-qualification numbers on your own income and expenses, use this Mortgage Pre-Qualification Calculator.

Just Guidelines

Remember these ratios are just guidelines. We will be thrilled to help you pre-qualify to determine how large a mortgage loan you can afford.

At Reliance Mortgage Service, Inc, we answer questions about qualifying all the time. Give us a call: 5623200510.