Debt to Income Ratios

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after you've paid your other recurring debts.

In general, underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying 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 (including loan principal and interest, private mortgage insurance, hazard insurance, property taxes, and homeowners' association dues).

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

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

Remember these ratios are only guidelines. We will be happy to help you pre-qualify to help you figure out how much you can afford.