Ratio of Debt-to-Income

The debt to income ratio is a tool lenders use to calculate how much of your income can be used for your monthly home loan payment after all your other recurring debt obligations have been fulfilled.

About your qualifying ratio

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

In 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 hazard insurance, HOA dues, Private Mortgage Insurance - everything.

The second number in the ratio is what percent of your gross income every month that can be spent on housing expenses and recurring debt together. Recurring debt includes car payments, child support and monthly credit card payments.

For example:

28/36 (Conventional)

  • 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'd like to calculate pre-qualification numbers on your own income and expenses, we offer a Loan Qualification Calculator.

Just Guidelines

Don't forget these are just guidelines. We will be thrilled to go over pre-qualification to determine how large a mortgage loan you can afford.

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

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