Debt to Income Ratio

Your debt to income ratio is a tool lenders use to determine how much of your income is available for a monthly mortgage payment after you meet your other monthly debt payments.

How to figure your qualifying ratio

Most underwriting for conventional mortgages 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 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 homeowners' insurance, HOA dues, PMI - everything that makes up the full payment.

The second number is what percent of your gross income every month that can be spent on housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, vehicle loans, child support, and the like.

Some example data:

With a 28/36 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 want to run your own numbers, use this Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

Remember these are just guidelines. We will be thrilled to help you pre-qualify to help you determine how large a mortgage loan you can afford.

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

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