Debt to Income Ratio

The debt to income ratio is a tool lenders use to determine how much of your income is available for a monthly home loan payment after all your other recurring debts have been met.

How to figure your qualifying ratio

Most underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be spent on housing (this includes loan principal and interest, private mortgage insurance, homeowner's insurance, taxes, and homeowners' association dues).

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

Some example data:

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 run your own numbers, use this Mortgage Loan Pre-Qualification Calculator.

Just Guidelines

Don't forget these ratios are only guidelines. We'd be thrilled to help you pre-qualify to determine how much you can afford.

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

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