Ratio of Debt to Income

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after you have paid your other monthly loans.

About the qualifying ratio

Typically, underwriting for conventional 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.

For these ratios, the first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that constitutes the payment.

The second number is what percent of your gross income every month that can be applied to housing expenses and recurring debt. Recurring debt includes vehicle loans, child support and credit card payments.

Examples:

A 28/36 qualifying ratio

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, please use this Mortgage Loan Qualification Calculator.

Guidelines Only

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

At Southwest Funding #841, we answer questions about qualifying all the time. Call us at (512) 291-6100.

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