Debt/Income Ratio

The debt to income ratio is a tool lenders use to calculate how much of your income can be used for your monthly home loan payment after all your other monthly debts have been fulfilled.

Understanding the qualifying ratio

Most conventional loans need 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 in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can go to housing (including mortgage principal and interest, private mortgage insurance, hazard insurance, property taxes, and homeowners' association dues).

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

Some example data:

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 calculate pre-qualification numbers on your own income and expenses, feel free to use our Loan Pre-Qualification Calculator.

Just Guidelines

Don't forget these are just guidelines. We will be happy to pre-qualify you to help you figure out 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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