Ratio of Debt to Income

Your debt to income ratio is a tool lenders use to determine how much of your income is available for your monthly mortgage payment after all your other monthly debts have been fulfilled.

About the qualifying ratio

For the most part, 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) 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, PMI - everything that constitutes the payment.

The second number in the ratio is what percent of your gross income every month which can be spent on housing costs and recurring debt. Recurring debt includes things like car payments, child support and monthly credit card payments.

Examples:

A 28/36 ratio

  • 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 want to run your own numbers, please use this Mortgage Pre-Qualifying Calculator.

Just Guidelines

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

At Net Equity Financial Mortgage, we answer questions about qualifying all the time. Call us: (215)741-3131.

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