Ratio of Debt to Income
The debt to income ratio is a tool lenders use to calculate how much money can be used for a monthly mortgage payment after you have met your various other monthly debt payments.
How to figure the qualifying ratio
Usually, conventional loans require a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.
For these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything that constitutes the full payment.
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. For purposes of this ratio, debt includes payments on credit cards, car loans, child support, and the like.
With a 28/36 ratio
- Gross monthly income of $2,700 x .28 = $756 can be applied to housing
- Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $2,700 x .29 = $783 can be applied to housing
- Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses
If you'd like to run your own numbers, please use this Mortgage Loan Pre-Qualifying Calculator.
Don't forget these are just guidelines. We will be thrilled to pre-qualify you to help you figure out how much you can afford.
At Family Mortgage Company of Hawaii, Inc. NMLS #244497, we answer questions about qualifying all the time. 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.