Ratio of Debt to Income

The debt to income ratio is a formula lenders use to calculate how much money can be used for a monthly home loan payment after all your other recurring debts are fulfilled.

About your qualifying ratio

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

The first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything that makes up the full payment.

The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing expenses and recurring debt. Recurring debt includes things like car loans, child support and credit card payments.

For example:

28/36 (Conventional)

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, use this Mortgage Qualifying Calculator.

Just Guidelines

Don't forget these ratios are only guidelines. We will be thrilled to help you pre-qualify to help you figure out how large a mortgage loan you can afford.

At Foxfield Financial, we answer questions about qualifying all the time. Give us a call at 720-598-8300.

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