Debt to Income Ratio

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

How to figure your 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) 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 (this includes mortgage principal and interest, PMI, hazard insurance, taxes, and homeowners' association dues).

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 together. Recurring debt includes auto/boat loans, child support and credit card payments.

Some example data:

With a 28/36 qualifying ratio

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, we offer a Loan Qualification Calculator.

Guidelines Only

Remember these ratios are only guidelines. We will be happy to pre-qualify you to help you determine how much you can afford.

Southwest Funding #841 can answer questions about these ratios and many others. Give us a call: (512) 291-6100.

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