Ratio of Debt to Income

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

Understanding your qualifying ratio

Usually, conventional mortgage loans need a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

The first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number in the ratio 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, auto payments, child support, and the like.

Examples:

With 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 calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Loan Pre-Qualifying Calculator.

Just Guidelines

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

Yamini Patel can walk you through the pitfalls of getting a mortgage. Call us at (832) 730-2000.

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