Ratio of Debt-to-Income

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

About the qualifying ratio

Typically, underwriting for conventional mortgage loans needs 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.

For these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything.

The second number in the ratio is what percent of your gross income every month which can be spent on housing expenses and recurring debt. Recurring debt includes credit card payments, auto payments, child support, and the like.

Examples:

With a 28/36 qualifying ratio

• 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'd like to calculate pre-qualification numbers with your own financial data, use this Mortgage Pre-Qualification Calculator.

Just Guidelines

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

Mortgage Headquarters of Missouri, Inc can walk you through the pitfalls of getting a mortgage. Give us a call: 5733029990.