Debt/Income Ratio

Your ratio of debt to income is a formula lenders use to calculate how much money is available for your monthly home loan payment after you meet your various other monthly debt payments.

Understanding 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) ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be applied to housing (including loan principal and interest, PMI, hazard insurance, taxes, and homeowners' association dues).

The second number is what percent of your gross income every month that should be spent on housing costs and recurring debt. Recurring debt includes car loans, child support and monthly credit card payments.

For example:

28/36 (Conventional)

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, use this Loan Qualification Calculator.

Just Guidelines

Remember these are just guidelines. We'd be happy to help you pre-qualify to determine how much you can afford.

The Mortgage Exchange Service LLC can walk you through the pitfalls of getting a mortgage. Give us a call at 703.255-5810.

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