Ratio of Debt to Income

The ratio of debt to income is a formula lenders use to determine how much money can be used for your monthly home loan payment after all your other recurring debts have been met.

About your qualifying ratio

Most underwriting for conventional mortgages needs a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything.

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

Examples:

With a 28/36 qualifying 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'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our Mortgage Qualification Calculator.

Guidelines Only

Remember these are just guidelines. We'd be happy to pre-qualify you to determine how much you can afford.

Foxfield Financial can answer questions about these ratios and many others. Give us a call: 720-598-8300.

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