Debt-to-Income Ratio

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

How to figure the qualifying ratio

For the most part, conventional mortgages 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 amount (as a percentage) of your gross monthly income that can be spent on housing costs (this includes loan principal and interest, private mortgage insurance, homeowner's insurance, property tax, and homeowners' association dues).

The second number is what percent of your gross income every month which can be spent on housing expenses and recurring debt. Recurring debt includes car loans, child support and credit card payments.

Some example data:

A 28/36 qualifying ratio

  • 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 Loan Pre-Qualification Calculator.

Just Guidelines

Remember these are just guidelines. We will be thrilled to help you pre-qualify to determine how large a mortgage loan you can afford.

Riviera Funding NMLS#861382 CA DRE Broker #01186669 can walk you through the pitfalls of getting a mortgage. Call us: 3103737406.

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Riviera Funding NMLS#861382 CA DRE Broker #01186669

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