Ratio of Debt-to-Income

Your debt to income ratio is a tool lenders use to determine how much money is available for a monthly home loan payment after all your other monthly debt obligations are fulfilled.

How to figure your qualifying ratio

For the most part, underwriting for conventional mortgage 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.

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, PMI - everything that constitutes the full payment.

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

For example:

28/36 (Conventional)

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, use this Mortgage Qualifying Calculator.

Guidelines Only

Don't forget these are only guidelines. We will be thrilled to help you pre-qualify to determine how large a mortgage you can afford.

Forum Mortgage Bancorp can walk you through the pitfalls of getting a mortgage. Give us a call at (773) 774-9040 Ext 121.

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