Ratio of Debt-to-Income

The debt to income ratio is a tool lenders use to determine how much of your income can be used for a monthly home loan payment after all your other monthly debt obligations have been fulfilled.

Understanding the qualifying ratio

In general, conventional mortgages require 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 the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything.

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 together. For purposes of this ratio, debt includes payments on credit cards, car payments, child support, etcetera.

Some example data:

A 28/36 ratio

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Pre-Qualifying Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We'd be happy to go over pre-qualification to determine how large a mortgage you can afford.

At Saab Mortgage, we answer questions about qualifying all the time. Call us: 703-288-0777.

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