Debt-to-Income Ratio

The debt to income ratio is a tool lenders use to determine how much money can be used for your monthly home loan payment after all your other recurring debt obligations are met.

Understanding your qualifying ratio

Typically, underwriting for conventional mortgage loans requires 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.

In 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, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month that can be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, vehicle payments, child support, and the like.

Examples:

With a 28/36 ratio

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, feel free to use our superb Mortgage Loan Qualification Calculator.

Just Guidelines

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

At Absolute Mortgage, a Division of Finance of America Mortgage, LLC, we answer questions about qualifying all the time. Call us: 253-848-1255.

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