Ratio of Debt to Income

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Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other monthly debts are paid.

How to figure the qualifying ratio

Typically, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

For these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything that makes up the payment.

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

Examples:

With 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, feel free to use our very useful Mortgage Qualifying Calculator.

Guidelines Only

Remember these ratios are just guidelines. We'd be thrilled to pre-qualify you to help you determine how large a mortgage loan you can afford.

Steve can walk you through the pitfalls of getting a mortgage. Call me today at (405) 447-8087.