Ratio of Debt to Income

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

How to figure the qualifying ratio

Typically, conventional 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.

In these ratios, the first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything that constitutes the full payment.

The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing expenses and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto/boat loans, child support, and the like.

Examples:

With a 28/36 ratio

  • 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, we offer a Loan Pre-Qualification Calculator.

Guidelines Only

Don't forget these are just guidelines. We will be happy to help you pre-qualify to help you figure out how much you can afford.

Ward Kilduff Mortgage can answer questions about these ratios and many others. Give us a call: (860) 658-7100.

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