Ratio of Debt to Income

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after you have paid your other recurring debts.

Understanding the qualifying ratio

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

The first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything.

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

Some example data:

28/36 (Conventional)

• 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, please use this Mortgage Loan Qualification Calculator.

Just Guidelines

Remember these are just guidelines. We'd be happy to help you pre-qualify to help you determine how much you can afford.

Firelight Mortgage Consultants can answer questions about these ratios and many others. Call us at 7209331025.