Ratio of Debt-to-Income
The ratio of debt to income is a tool lenders use to calculate how much money can be used for your monthly mortgage payment after all your other recurring debts are fulfilled.
About your qualifying ratio
Most underwriting for conventional loans requires a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.
The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be spent on housing costs (including principal and interest, PMI, hazard insurance, taxes, and homeowners' association dues).
The second number is the maximum percentage of your gross monthly income that can be spent on housing expenses and recurring debt. Recurring debt includes things like auto loans, child support and credit card payments.
Some example data:
A 28/36 ratio
- Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
- Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
- Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses
If you want to run your own numbers, we offer a Mortgage Qualifying Calculator.
Don't forget these are only guidelines. We will be happy to pre-qualify you to help you figure out how much you can afford.
At Chris Caggiano - Grand Oaks Funding, LLC, we answer questions about qualifying all the time. Call us: (718) 477-4405.