Debt-to-Income Ratio

Your ratio of debt to income is a tool lenders use to calculate how much of your income is available for your monthly home loan payment after all your other monthly debt obligations are met.

How to figure the qualifying ratio

Typically, underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can go to housing costs (including principal and interest, private mortgage insurance, homeowner's insurance, property tax, and homeowners' association dues).

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

Some example data:

A 28/36 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 want to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Pre-Qualification Calculator.

Guidelines Only

Remember these ratios are only guidelines. We'd be thrilled to pre-qualify you to determine how much you can afford.

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

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