Debt/Income Ratio

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after you've paid your other recurring loans.

About your qualifying ratio

Usually, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

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 hazard insurance, homeowners' dues, Private Mortgage Insurance - everything.

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

Examples:

28/36 (Conventional)

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, please use this Mortgage Loan Pre-Qualifying Calculator.

Guidelines Only

Remember these are just guidelines. We'd be thrilled to go over pre-qualification to determine how large a mortgage loan you can afford.

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

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