Ratio of Debt to Income

The debt to income ratio is a formula lenders use to determine how much of your income is available for your monthly home loan payment after you meet your various other monthly debt payments.

About the qualifying ratio

Most conventional mortgages require a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

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 homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything that makes up the payment.

The second number is what percent of your gross income every month that can be applied to housing expenses and recurring debt together. Recurring debt includes payments on credit cards, car loans, child support, and the like.

Examples:

28/36 (Conventional)

  • 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 Mortgage Loan Qualification Calculator.

Guidelines Only

Don't forget these ratios are only guidelines. We will be thrilled to go over pre-qualification to help you figure out how much you can afford.

Firelight Mortgage Consultants can walk you through the pitfalls of getting a mortgage. Call us at (303) 228-2254.

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