Ratio of Debt-to-Income

The debt to income ratio is a formula lenders use to determine how much money can be used for your monthly home loan payment after all your other monthly debts have been fulfilled.

Understanding your qualifying ratio

Most underwriting for conventional mortgage loans requires 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 go to housing costs (this includes principal and interest, private mortgage insurance, homeowner's insurance, property tax, and HOA dues).

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

Examples:

28/36 (Conventional)

• 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 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 pre-qualify you to help you figure out how much you can afford.

Secure Mortgage Company can walk you through the pitfalls of getting a mortgage. Call us: (713) 667-5472.