Debt to Income Ratio

The debt to income ratio is a formula lenders use to calculate how much of your income is available for a monthly home loan payment after all your other monthly debts are fulfilled.

How to figure your qualifying ratio

Most underwriting for conventional mortgages requires 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 amount (as a percentage) of gross monthly income that can be spent on housing costs (this includes mortgage principal and interest, PMI, hazard insurance, property taxes, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt together. Recurring debt includes things like vehicle payments, child support and monthly credit card payments.

Some example data:

With a 28/36 qualifying ratio

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, please use this Mortgage Pre-Qualifying Calculator.

Just Guidelines

Remember these ratios are just guidelines. We'd be thrilled to go over pre-qualification to help you figure out how large a mortgage loan you can afford.

Saab Mortgage can answer questions about these ratios and many others. Give us a call: 703-288-0777.

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