Debt/Income Ratio

The debt to income ratio is a tool lenders use to determine how much of your income can be used for your monthly mortgage payment after all your other monthly debt obligations have been met.

Understanding the qualifying ratio

Most conventional mortgages require a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

The first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that constitutes the payment.

The second number is what percent of your gross income every month which can be applied to housing costs and recurring debt. Recurring debt includes things like auto/boat loans, child support and credit card payments.

For example:

28/36 (Conventional)

• Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
• Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
• Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, we offer a Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

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

1st Credential Mortgage Inc can answer questions about these ratios and many others. Call us: (281) 778-0805.