Ratio of Debt-to-Income

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

Understanding your qualifying ratio

Typically, conventional mortgages 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 how much (by percent) of your gross monthly income that can be spent on housing costs. 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 spent on housing expenses and recurring debt. Recurring debt includes payments on credit cards, vehicle payments, child support, etcetera.

Examples:

With a 28/36 qualifying 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, please use this Mortgage Loan Pre-Qualifying Calculator.

Guidelines Only

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

Executive Lending Group, LLC can walk you through the pitfalls of getting a mortgage. Give us a call: (816) 525-8000.