Ratio of Debt-to-Income

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

How to figure your qualifying ratio

Most underwriting for conventional loans requires 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 percentage of your gross monthly income that can go to housing (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 should be applied to housing costs and recurring debt. Recurring debt includes credit card payments, auto payments, child support, etcetera.

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 with your own financial data, feel free to use our Mortgage Loan Qualifying Calculator.

Guidelines Only

Remember these ratios are just guidelines. We will be thrilled to go over pre-qualification to help you determine how large a mortgage loan you can afford.

Norma Moreno-Squier can walk you through the pitfalls of getting a mortgage. Give us a call at 6023326989.

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Norma Moreno-Squier
NMLS#212839

New West Lending, Inc.

7310 N. 16th Street Ste. 170
Phoenix, AZ 85020