Debt/Income Ratio
The debt to income ratio is a tool lenders use to calculate how much money is available for a monthly home loan payment after all your other monthly debts are fulfilled.
About your qualifying ratio
In general, conventional mortgages 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 your gross monthly income that can be spent on housing (including mortgage principal and interest, PMI, hazard insurance, property taxes, and HOA dues).
The second number is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt. Recurring debt includes things like auto payments, child support and monthly credit card payments.
For example:
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, feel free to use our Mortgage Qualification Calculator.
Guidelines Only
Don't forget these ratios are just guidelines. We'd be thrilled to pre-qualify you to help you figure out how much you can afford.
At Morgage 27, we answer questions about qualifying all the time. Call us at 4054206125.