Debt-to-Income Ratio
Your debt to income ratio is a tool lenders use to calculate how much of your income is available for a monthly mortgage payment after you have met your various other monthly debt payments.
About the qualifying ratio
Usually, underwriting for conventional mortgage loans requires a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.
The first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything.
The second number in the ratio is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt together. Recurring debt includes things like auto loans, child support and credit card payments.
For example:
28/36 (Conventional)
- Gross monthly income of $2,700 x .28 = $756 can be applied to housing
- Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $2,700 x .29 = $783 can be applied to housing
- Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses
If you'd like to calculate pre-qualification numbers with your own financial data, feel free to use our very useful Loan Pre-Qualification Calculator.
Just Guidelines
Don't forget these are only guidelines. We will be happy to go over pre-qualification to determine how large a mortgage loan you can afford.
At Executive Lending Group, LLC, we answer questions about qualifying all the time. Call us at 8165258000.