Debt-to-Income Ratio

Your debt to income ratio is a tool lenders use to calculate how much money can be used for a monthly home loan payment after you meet your other monthly debt payments.

About the qualifying ratio

Typically, conventional loans 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 is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything that makes up the full payment.

The second number is what percent of your gross income every month that should be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, auto/boat loans, child support, etcetera.

Examples:

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 with your own financial data, feel free to use our very useful Mortgage Loan Qualification Calculator.

Guidelines Only

Don't forget these ratios are only guidelines. We will be happy to pre-qualify you to determine how large a mortgage you can afford.

Chris Caggiano - Grand Oaks Funding, LLC can walk you through the pitfalls of getting a mortgage. Give us a call at (718) 477-4405.

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