Debt/Income Ratio

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you have paid your other monthly loans.

How to figure the qualifying ratio

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

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be applied to housing costs (including principal and interest, PMI, hazard insurance, property tax, and homeowners' association dues).

The second number in the ratio is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, auto/boat loans, child support, and the like.

Examples:

28/36 (Conventional)

  • 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 run your own numbers, feel free to use our very useful Mortgage Pre-Qualification Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We'd be happy to help you pre-qualify to help you figure out how much you can afford.

F&T Mortgage, Inc. NMLS # 168839 (www.nmlsconsumeraccess.org) can walk you through the pitfalls of getting a mortgage. Call us at 214-300-8756.



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