Debt-to-Income Ratio
The ratio of debt to income is a formula lenders use to calculate how much money can be used for a monthly mortgage payment after you have met your various other monthly debt payments.
About the qualifying ratio
In general, conventional mortgages require a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.
The first number is the percentage of your gross monthly income that can go toward 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 applied to housing expenses and recurring debt. For purposes of this ratio, debt includes payments on credit cards, car loans, child support, and the like.
Some example data:
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'd like to run your own numbers, we offer a Mortgage Pre-Qualification Calculator.
Guidelines Only
Remember these ratios are just guidelines. We'd be thrilled to go over pre-qualification to determine how large a mortgage you can afford.
At Southwest Funding #841
Company NMLS # 303440, we answer questions about qualifying all the time. Call us: 5122916100.