Debt-to-Income Ratio

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

Understanding the qualifying ratio

Most conventional loans require a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be spent on housing (this includes mortgage principal and interest, PMI, homeowner's insurance, property tax, and HOA dues).

The second number is the maximum percentage of your gross monthly income that should be spent on housing expenses and recurring debt. Recurring debt includes credit card payments, auto/boat payments, child support, and the like.

For example:

A 28/36 qualifying ratio

  • 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

If you'd like to calculate pre-qualification numbers with your own financial data, we offer a Loan Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We will be happy to go over pre-qualification to help you determine how large a mortgage you can afford.

At F&T Mortgage, Inc. NMLS # 168839 (www.nmlsconsumeraccess.org), we answer questions about qualifying all the time. Give us a call at 214-300-8756.



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