Debt-to-Income Ratio

Your ratio of debt to income is a tool lenders use to determine how much of your income is available for your monthly mortgage payment after all your other recurring debts have been fulfilled.

Understanding the qualifying ratio

Most conventional 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 in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can go to housing costs (including principal and interest, PMI, homeowner's insurance, property taxes, and HOA dues).

The second number is the maximum percentage of your gross monthly income that should be spent on housing costs and recurring debt. Recurring debt includes auto/boat loans, child support and monthly credit card payments.

For example:

A 28/36 ratio

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, feel free to use our very useful Mortgage Pre-Qualification Calculator.

Just Guidelines

Don't forget these are just guidelines. We will be happy to go over pre-qualification to help you figure out how much you can afford.

At Real Property Finance, we answer questions about qualifying all the time. Call us at 310-379-5997.

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