Debt to Income Ratio

The ratio of debt to income is a formula lenders use to calculate how much of your income is available for a monthly mortgage payment after all your other monthly debt obligations have been fulfilled.

How to figure the qualifying ratio

For the most part, underwriting for conventional mortgage loans requires 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 is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything.

The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes payments on credit cards, auto/boat payments, child support, and the like.

For example:

28/36 (Conventional)

  • 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 on your own income and expenses, feel free to use our Mortgage Loan Qualification Calculator.

Just Guidelines

Don't forget these ratios are only guidelines. We will be thrilled to go over pre-qualification to determine how much you can afford.

At VSI Home Lending, we answer questions about qualifying all the time. Call us: (260) 338-2561.

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