Ratio of Debt to Income

The ratio of debt to income is a formula lenders use to determine how much money is available for a monthly home loan payment after all your other monthly debt obligations have been met.

How to figure your qualifying ratio

In general, underwriting for conventional mortgages needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

In these ratios, the first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything that makes up the payment.

The second number is what percent of your gross income every month that can be applied to housing costs and recurring debt. Recurring debt includes credit card payments, vehicle payments, child support, and the like.

For example:

With a 28/36 qualifying ratio

• Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
• Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
• Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, please use this Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

Remember these ratios are just guidelines. We will be happy to help you pre-qualify to help you determine how much you can afford.

Riviera Funding NMLS#861382 CA DRE Broker #01186669 can answer questions about these ratios and many others. Give us a call: 3103737406.