Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other monthly debts are paid.

About the qualifying ratio

Most conventional mortgages require 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 applied to housing (this includes loan principal and interest, PMI, homeowner's insurance, taxes, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income which can be applied to housing costs and recurring debt together. Recurring debt includes auto loans, child support and credit card payments.

For example:

A 28/36 ratio

• Gross monthly income of $3,500 x .28 = $980 can be applied to housing
• Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
• Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, please use this Loan Qualification Calculator.

Just Guidelines

Remember these are just guidelines. We'd be happy to pre-qualify you to determine how large a mortgage loan you can afford.

Greystone Loans, Inc. can answer questions about these ratios and many others. Give us a call at 9094671090.