Debt to Income Ratio

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after you have paid your other recurring debts.

How to figure the qualifying ratio

Typically, underwriting for conventional mortgages requires a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

The first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything.

The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing expenses and recurring debt together. Recurring debt includes payments on credit cards, auto/boat payments, child support, and the like.

Examples:

A 28/36 qualifying 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'd like to calculate pre-qualification numbers with your own financial data, please use this Mortgage Qualification Calculator.

Guidelines Only

Don't forget these are just guidelines. We'd be happy to pre-qualify you to help you figure out how much you can afford.

Family Mortgage Company of Hawaii, Inc. NMLS #244497 can answer questions about these ratios and many others. Call us: (808) 935-0678.

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