Debt to Income Ratio

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

How to figure your qualifying ratio

In general, conventional mortgages require a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 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 (including mortgage principal and interest, PMI, hazard insurance, property taxes, and HOA dues).

The second number in the ratio is what percent of your gross income every month which can be spent on housing expenses and recurring debt together. For purposes of this ratio, debt includes credit card payments, vehicle payments, child support, etcetera.

Examples:

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 run your own numbers, we offer a Mortgage Loan Qualification Calculator.

Just Guidelines

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

At Foxfield Financial, we answer questions about qualifying all the time. Call us at 7205988300.