Ratio of Debt to Income

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

How to figure your qualifying ratio

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

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be applied to housing costs (this includes principal and interest, PMI, homeowner's insurance, taxes, and homeowners' association dues).

The second number in the ratio is the maximum percentage of your gross monthly income that should be spent on housing expenses and recurring debt together. Recurring debt includes credit card payments, vehicle payments, child support, and the like.

Some example data:

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 run your own numbers, feel free to use our very useful Mortgage Pre-Qualifying Calculator.

Guidelines Only

Don't forget these are just guidelines. We'd be thrilled to pre-qualify you to help you determine how much you can afford.

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

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