Debt/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 home loan payment after you meet your various other monthly debt payments.

About your qualifying ratio

In general, underwriting for conventional loans needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

In these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing costs. 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 that should be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, car loans, child support, and the like.

For example:

A 28/36 qualifying ratio

  • 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 want to run your own numbers, please use this Mortgage Qualification Calculator.

Guidelines Only

Don't forget these are only guidelines. We'd be happy to pre-qualify you to help you figure out how much 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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