Ratio of Debt to Income

Your debt to income ratio is a formula lenders use to calculate how much of your income can be used for your monthly mortgage payment after you have met your various other monthly debt payments.

Understanding the 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) ratio.

The first number is the percentage 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.

The second number is what percent of your gross income every month which can be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto payments, child support, etcetera.

For example:

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 calculate pre-qualification numbers with your own financial data, please use this Loan Qualifying Calculator.

Just Guidelines

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

PREMIERE MORTGAGE SERVICES INC. can answer questions about these ratios and many others. Give us a call: 978-422-2311.

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