Ratio of Debt to Income

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

How to figure the qualifying ratio

For the most part, conventional loans need a qualifying ratio of 28/36. FHA loans are a little 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, HOA dues, Private Mortgage Insurance - everything that constitutes the payment.

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

Examples:

28/36 (Conventional)

  • 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 calculate pre-qualification numbers on your own income and expenses, feel free to use our very useful 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 large a mortgage you can afford.

First Access Mortgage can walk you through the pitfalls of getting a mortgage. Give us a call: (985) 429-1770.

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