Debt-to-Income Ratio

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after your other monthly debts are paid.

How to figure the qualifying ratio

Most conventional mortgage loans need 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 percentage of your gross monthly income that can be spent on housing costs (this includes loan principal and interest, private mortgage insurance, hazard insurance, property tax, and homeowners' association dues).

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

For example:

28/36 (Conventional)

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

Just Guidelines

Remember these ratios are just guidelines. We will be happy to pre-qualify you to help you figure out how large a mortgage loan you can afford.

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