Ratio of Debt to Income

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after you've paid your other recurring debts.

Understanding the qualifying ratio

Most conventional mortgage 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) qualifying ratio.

The first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything.

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. For purposes of this ratio, debt includes credit card payments, car loans, child support, etcetera.

Some example data:

With a 28/36 qualifying 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 Mortgage Loan Pre-Qualifying Calculator.

Guidelines Only

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

VSI Home Lending can answer questions about these ratios and many others. Call us: 2603382561.