Debt/Income Ratio
The ratio of debt to income is a tool lenders use to determine how much of your income can be used for your monthly mortgage payment after you meet your various other monthly debt payments.
About the qualifying ratio
Usually, conventional loans need a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.
The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be spent on housing (this includes loan principal and interest, PMI, homeowner's insurance, property taxes, and homeowners' association dues).
The second number in the ratio is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes payments on credit cards, vehicle payments, child support, etcetera.
Some example data:
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'd like to run your own numbers, we offer a Mortgage Loan Qualification Calculator.
Guidelines Only
Remember these ratios are just guidelines. We'd be happy to pre-qualify you to help you figure out how large a mortgage you can afford.
At Foxfield Financial, we answer questions about qualifying all the time. Call us: 7205988300.