Ratio of Debt-to-Income

The ratio of debt to income is a formula lenders use to calculate how much of your income is available for a monthly mortgage payment after all your other recurring debts are fulfilled.

About your qualifying ratio

Most conventional loans 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.

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

The second number is what percent of your gross income every month that should be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes credit card payments, vehicle loans, child support, and the like.

For example:

With 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 with your own financial data, feel free to use our superb Loan Qualifying Calculator.

Just Guidelines

Remember these are only guidelines. We will be happy to go over pre-qualification to determine how much you can afford.

Reliance Mortgage Service, Inc can answer questions about these ratios and many others. Give us a call at 562 320-0510.

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