Debt-to-Income Ratio

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Your ratio of debt to income is a tool lenders use to determine how much money is available for your monthly mortgage payment after all your other monthly debt obligations are fulfilled.

How to figure your qualifying ratio

Most underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number is the percentage 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, Private Mortgage Insurance - everything that makes up the payment.

The second number in the ratio is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt together. Recurring debt includes credit card payments, auto/boat payments, child support, et cetera.

Some example data:

28/36 (Conventional)

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, we offer a Mortgage Loan Pre-Qualifying Calculator.

Don't forget these ratios are just guidelines. We'd be thrilled to pre-qualify you to help you determine how large a mortgage loan you can afford. Community Mortgage Corp. can answer questions about these ratios and many others. Give us a call at (630) 534-5500.