Debt/Income Ratio

Your debt to income ratio is a formula lenders use to determine how much money is available for a monthly mortgage payment after all your other recurring debts are fulfilled.

How to figure your qualifying ratio

In general, underwriting for conventional mortgage loans requires a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

In these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that constitutes the payment.

The second number is what percent of your gross income every month which can be spent on housing costs and recurring debt together. Recurring debt includes things like auto/boat loans, child support and monthly credit card payments.

Examples:

A 28/36 qualifying ratio

• Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
• Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
• Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Qualification Calculator.

Guidelines Only

Don't forget these are just guidelines. We'd be happy to go over pre-qualification to help you determine how large a mortgage you can afford.

Riviera Funding NMLS#861382 CA DRE Broker #01186669 can answer questions about these ratios and many others. Call us at 3103737406.