Debt-to-Income Ratio

The debt to income ratio is a formula lenders use to calculate how much of your income can be used for your monthly home loan payment after all your other monthly debts are met.

About your qualifying ratio

In general, conventional mortgages require a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

The first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything that makes up the full payment.

The second number is what percent of your gross income every month which can be spent on housing costs and recurring debt together. Recurring debt includes payments on credit cards, auto/boat payments, child support, and the like.

Some example data:

With a 28/36 ratio

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, please use this Mortgage Qualification Calculator.

Just Guidelines

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.

Valley Savers Mortgage, LLC can walk you through the pitfalls of getting a mortgage. Call us: (602) 332-9544.

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