Ratio of Debt to Income

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

Understanding the qualifying ratio

Most underwriting for conventional mortgage loans requires a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

In these ratios, the first number is how much (by percent) of your gross monthly income that can go toward 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 is what percent of your gross income every month that can be spent on housing costs and recurring debt. Recurring debt includes things like auto payments, child support and monthly credit card payments.

Some example data:

With a 28/36 ratio

• Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
• Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
• Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, we offer a Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We will be thrilled to help you pre-qualify to determine how large a mortgage you can afford.

Amity Mortgage LLC can walk you through the pitfalls of getting a mortgage. Call us at 2037296681.