Debt to Income Ratio

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after you have paid your other recurring loans.

How to figure your qualifying ratio

For the most part, underwriting for conventional mortgage loans requires a qualifying ratio of 28/36. FHA loans are a little 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. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything that makes up the payment.

The second number is the maximum percentage of your gross monthly income that should be spent on housing expenses and recurring debt. For purposes of this ratio, debt includes payments on credit cards, auto payments, child support, and the like.

For example:

28/36 (Conventional)

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, we offer a Loan Pre-Qualification Calculator.

Just Guidelines

Don't forget these are just guidelines. We'd be thrilled to go over pre-qualification to help you figure out how much you can afford.

Foxfield Financial can walk you through the pitfalls of getting a mortgage. Give us a call: 720-598-8300.

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