Ratio of Debt to Income

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after you have paid your other recurring loans.

Understanding the qualifying ratio

In general, underwriting for conventional mortgage 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) ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be applied to housing costs (including principal and interest, PMI, homeowner's insurance, property tax, and HOA dues).

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

For example:

A 28/36 qualifying 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 calculate pre-qualification numbers with your own financial data, feel free to use our Loan Qualification Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We will be thrilled to go over pre-qualification to determine how much you can afford.

Net Equity Financial Mortgage LLC can walk you through the pitfalls of getting a mortgage. Give us a call: 2157413131.