Ratio of Debt to Income
The debt to income ratio is a tool lenders use to calculate how much of your income can be used for your monthly mortgage payment after you have met your other monthly debt payments.
About the qualifying ratio
Usually, underwriting for conventional loans needs 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.
The first number is the percentage 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, PMI - everything.
The second number is what percent of your gross income every month that can be spent on housing expenses and recurring debt. Recurring debt includes things like auto payments, child support and credit card payments.
A 28/36 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 want to run your own numbers, feel free to use our superb Mortgage Qualification Calculator.
Remember these are only guidelines. We'd be happy to help you pre-qualify to determine 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.
Got a Question?
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.