Debt to Income Ratio
Your ratio of debt to income is a formula lenders use to determine how much money can be used for a monthly mortgage payment after you have met your various other monthly debt payments.
How to figure your qualifying ratio
For the most part, conventional mortgage loans require a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.
The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can go to housing costs (including principal and interest, PMI, hazard insurance, property taxes, and HOA dues).
The second number is the maximum percentage of your gross monthly income which can be applied to housing expenses and recurring debt. Recurring debt includes credit card payments, auto/boat loans, child support, and the like.
Examples:
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, please use this Mortgage Qualification Calculator.
Guidelines Only
Don't forget these ratios are just guidelines. We'd be happy to go over pre-qualification to determine how much you can afford.
At Family Mortgage Company of Hawaii, Inc. NMLS #244497, we answer questions about qualifying all the time. Call us at (808) 935-0678.