Ratio of Debt-to-Income

Your debt to income ratio is a formula lenders use to determine how much of your income can be used for your monthly mortgage payment after all your other recurring debt obligations are fulfilled.

How to figure the qualifying ratio

In general, 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 in a qualifying ratio is the maximum percentage of gross monthly income that can be spent on housing costs (this includes principal and interest, PMI, hazard insurance, taxes, and HOA dues).

The second number in the ratio is what percent of your gross income every month which can be spent on housing expenses and recurring debt. Recurring debt includes things like auto 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'd like to run your own numbers, we offer a Mortgage Loan Qualifying Calculator.

Guidelines Only

Remember these are only guidelines. We'd be thrilled to pre-qualify you to help you figure out how large a mortgage loan you can afford.

At Riviera Funding NMLS#861382 CA DRE Broker #01186669, we answer questions about qualifying all the time. Call us at 3103737406.