Debt-to-Income Ratio

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

Understanding the qualifying ratio

For the most part, underwriting for conventional loans requires a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be applied to housing costs (this includes principal and interest, PMI, homeowner's insurance, taxes, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income which can be spent on housing expenses and recurring debt together. Recurring debt includes credit card payments, car payments, child support, and the like.

For example:

28/36 (Conventional)

• 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 want to run your own numbers, use this Mortgage Pre-Qualification Calculator.

Just Guidelines

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

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