Debt/Income Ratio

The debt to income ratio is a formula lenders use to calculate how much money is available for your monthly mortgage payment after you have met your various other monthly debt payments.

How to figure your qualifying ratio

For the most part, conventional mortgage loans need a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

In these ratios, the first number is the percentage of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything that constitutes the full payment.

The second number is what percent of your gross income every month that can be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, vehicle payments, child support, etcetera.

For example:

A 28/36 qualifying ratio

• 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'd like to run your own numbers, please use this Mortgage Loan Qualification Calculator.

Guidelines Only

Don't forget these are just guidelines. We will be happy to go over pre-qualification to determine how much you can afford.

ADVISORY MORTGAGE can walk you through the pitfalls of getting a mortgage. Give us a call: 8102292820.