Ratio of Debt-to-Income

The debt to income ratio is a tool lenders use to calculate how much of your income is available for a monthly mortgage payment after all your other monthly debt obligations are met.

About the qualifying ratio

Usually, 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 in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be spent on housing (including loan principal and interest, private mortgage insurance, homeowner's insurance, property taxes, and homeowners' association dues).

The second number is what percent of your gross income every month that can be spent on housing costs and recurring debt together. Recurring debt includes vehicle loans, child support and credit card payments.

Some example data:

With a 28/36 qualifying ratio

  • 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 want to run your own numbers, use this Loan Pre-Qualifying Calculator.

Just Guidelines

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

Riviera Funding can answer questions about these ratios and many others. Call us: (310) 373-7406.

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