Debt-to-Income Ratio

Your debt to income ratio is a formula lenders use to calculate how much of your income can be used for a monthly mortgage payment after you meet your various other monthly debt payments.

Understanding the qualifying ratio

Most underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

For these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything that constitutes the full payment.

The second number in the ratio is what percent of your gross income every month that can be applied to housing expenses and recurring debt. Recurring debt includes payments on credit cards, auto/boat payments, child support, and the like.

For example:

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 on your own income and expenses, we offer a Mortgage Qualifying Calculator.

Guidelines Only

Don't forget these ratios are only guidelines. We'd be thrilled to go over pre-qualification to help you figure out how large a mortgage loan you can afford.

Marc Moser / NMLS# 232625 / Licensed in Florida can walk you through the pitfalls of getting a mortgage. Give us a call: 727-466-4301.