Ratio of Debt to Income

Your debt to income ratio is a tool lenders use to calculate how much money is available for your monthly home loan payment after you meet your other monthly debt payments.

About your qualifying ratio

In general, underwriting for conventional mortgage loans needs 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 (including principal and interest, PMI, hazard insurance, taxes, and HOA dues).

The second number is what percent of your gross income every month that should be applied to housing expenses and recurring debt together. Recurring debt includes auto/boat loans, child support and credit card payments.

Examples:

28/36 (Conventional)

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, use this Mortgage Loan Pre-Qualification Calculator.

Just Guidelines

Remember these ratios are only guidelines. We'd be happy to help you pre-qualify 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. Give us a call: 3103737406.

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