Debt-to-Income Ratio

Your debt to income ratio is a formula lenders use to calculate how much money can be used for your monthly mortgage payment after all your other monthly debt obligations are met.

How to figure your qualifying ratio

Most conventional mortgage loans 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 in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be spent on housing (this includes mortgage principal and interest, private mortgage insurance, hazard insurance, property tax, and homeowners' association dues).

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

Examples:

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, feel free to use our very useful Mortgage Loan Pre-Qualifying Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We'd be thrilled to help you pre-qualify to determine how large a mortgage you can afford.

Executive Lending Group, LLC can answer questions about these ratios and many others. Call us at (816) 525-8000 & (81.

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