Debt-to-Income Ratio

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other recurring debts have been paid.

About the qualifying ratio

For the most part, conventional loans require a qualifying ratio of 28/36. FHA loans are less strict, 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 costs (this includes principal and interest, PMI, hazard insurance, taxes, and HOA dues).

The second number in the ratio is what percent of your gross income every month which can be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto/boat payments, child support, and the like.

For example:

28/36 (Conventional)

• Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
• Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
• Gross monthly income of $6,500 x .41 = $2,665 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'd be happy to pre-qualify you to help you figure out how much you can afford.

Net Equity Financial Mortgage LLC can answer questions about these ratios and many others. Give us a call at 2157413131.