Ratio of Debt-to-Income

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

How to figure the qualifying ratio

Typically, underwriting for conventional loans requires a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

For these ratios, the first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything.

The second number in the ratio is the maximum percentage of your gross monthly income that can be applied to housing expenses and recurring debt. Recurring debt includes vehicle payments, child support and monthly credit card payments.

For example:

With a 28/36 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 want to calculate pre-qualification numbers on your own income and expenses, feel free to use our very useful Loan Pre-Qualification Calculator.

Remember these ratios are only guidelines. We'd be thrilled to pre-qualify you to help you figure out how much you can afford. At SMI Lending, Inc., we answer questions about qualifying all the time. Call us at (972) 818-0022.