Debt-to-Income Ratio

Your ratio of debt to income is a formula lenders use to determine how much money can be used for your monthly mortgage payment after you have met your other monthly debt payments.

About your qualifying ratio

In general, conventional loans need a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

The first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything.

The second number in the ratio is what percent of your gross income every month that can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, car payments, child support, and the like.

Examples:

A 28/36 qualifying 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 want to calculate pre-qualification numbers on your own income and expenses, feel free to use our Mortgage Pre-Qualifying Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We'd be happy to pre-qualify you to help you determine how much you can afford.

Reliance Mortgage Service, Inc can answer questions about these ratios and many others. Call us at 5623200510.