Ratio of Debt to Income

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after your other monthly debts are paid.

Understanding the qualifying ratio

Most underwriting for conventional loans requires a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying 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 hazard insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month that can be applied to housing expenses and recurring debt. Recurring debt includes credit card payments, vehicle loans, child support, and the like.

For example:

A 28/36 qualifying ratio

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, we offer a Loan Qualification Calculator.

Guidelines Only

Don't forget these ratios are only guidelines. We'd be thrilled to go over pre-qualification to help you determine how large a mortgage loan you can afford.

Family Mortgage Company of Hawaii, Inc. NMLS #244497 can walk you through the pitfalls of getting a mortgage. Call us at (808) 935-0678.

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