Debt to Income Ratio

Your debt to income ratio is a formula lenders use to determine how much of your income is available for a monthly mortgage payment after you have met your other monthly debt payments.

Understanding your qualifying ratio

For the most part, underwriting for conventional loans requires a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

For these ratios, 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 constitutes the payment.

The second number is the maximum percentage of your gross monthly income which can be spent on housing expenses and recurring debt. For purposes of this ratio, debt includes payments on credit cards, auto payments, child support, and the like.

Examples:

A 28/36 qualifying ratio

• Gross monthly income of $3,500 x .28 = $980 can be applied to housing
• Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
• Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, use this Mortgage Qualification Calculator.

Just Guidelines

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

Mortgage Headquarters of Missouri, Inc can walk you through the pitfalls of getting a mortgage. Give us a call: 5733029990.