Debt to Income Ratio

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

Understanding your qualifying ratio

Typically, underwriting for conventional loans requires 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 gross monthly income that can be applied to housing costs (this includes loan principal and interest, private mortgage insurance, homeowner's insurance, taxes, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income that should be applied to housing costs and recurring debt. Recurring debt includes payments on credit cards, car payments, child support, and the like.

Some example data:

28/36 (Conventional)

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, feel free to use our Loan Qualification Calculator.

Just Guidelines

Remember these ratios are just guidelines. We will be thrilled to pre-qualify you to help you determine how large a mortgage loan you can afford.

At Financial Edge Mortgage Corp., we answer questions about qualifying all the time. Give us a call: 425-508-9988.

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