Debt to Income Ratio

The ratio of debt to income is a tool lenders use to calculate how much money can be used for a monthly mortgage payment after you meet your various other monthly debt payments.

About your qualifying ratio

For the most part, conventional loans require a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be spent on housing costs (this includes principal and interest, PMI, hazard insurance, taxes, and homeowners' association dues).

The second number in the ratio is what percent of your gross income every month that can be applied to housing expenses and recurring debt. Recurring debt includes things like vehicle payments, child support and credit card payments.

Examples:

With a 28/36 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 calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Pre-Qualification Calculator.

Guidelines Only

Don't forget these are only guidelines. We'd be thrilled to pre-qualify you to help you figure out how large a mortgage loan you can afford.

Alternative Mortgage Group can answer questions about these ratios and many others. Call us: 561-395-4264.


Alternative Mortgage Group

80 SW 14 Ave
Boca Raton, FL 33486