Ratio of Debt-to-Income

Your ratio of debt to income is a formula lenders use to determine how much of your income can be used for a monthly home loan payment after you meet your other monthly debt payments.

How to figure the qualifying ratio

For the most part, underwriting for conventional mortgages requires a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

In these ratios, the first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything.

The second number is what percent of your gross income every month which can be applied to housing costs and recurring debt. Recurring debt includes things like vehicle payments, child support and credit card payments.

Some example data:

A 28/36 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 run your own numbers, we offer a Mortgage Pre-Qualifying Calculator.

Guidelines Only

Don't forget these are just guidelines. We will be thrilled to pre-qualify you to determine how large a mortgage you can afford.

At Ameritrust Mortgage Associates,LLC (NMLS#167664), we answer questions about qualifying all the time. Call us at 5614179221.