Debt-to-Income Ratio

Your debt to income ratio is a formula lenders use to determine how much of your income can be used for your monthly mortgage payment after you have met your other monthly debt payments.

How to figure your qualifying ratio

In general, underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 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, private mortgage insurance, homeowner's insurance, property taxes, and homeowners' association dues).

The second number in the ratio is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes payments on credit cards, auto/boat loans, child support, and the like.

Some example data:

28/36 (Conventional)

  • 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 Loan Qualification Calculator.

Just Guidelines

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

South County Mortgage can walk you through the pitfalls of getting a mortgage. Give us a call: (401) 583-4150.

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