Ratio of Debt-to-Income

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Your ratio of debt to income is a tool lenders use to calculate how much money can be used for a monthly home loan payment after you have met your other monthly debt payments.

How to figure your qualifying ratio

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

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can go to housing costs (including principal and interest, PMI, hazard insurance, taxes, and HOA dues).

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. Recurring debt includes car loans, child support and credit card payments.

Examples:

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'd like to run your own numbers, we offer a Mortgage Loan Pre-Qualifying Calculator.

Guidelines Only

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

MainStreet Mortgage can walk you through the pitfalls of getting a mortgage. Call us at (818) 874-9900.