Debt to Income Ratio

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

About your qualifying ratio

In general, conventional loans need a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

For these ratios, the first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything that constitutes the full payment.

The second number in the ratio is the maximum percentage of your gross monthly income that should be spent on housing expenses and recurring debt together. Recurring debt includes things like vehicle payments, child support and credit card payments.

For example:

A 28/36 qualifying ratio

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, we offer a Loan Qualification Calculator.

Guidelines Only

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

At Firelight Mortgage Consultants, we answer questions about qualifying all the time. Call us at (303) 228-2254.

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