Debt/Income Ratio

Your debt to income ratio is a tool lenders use to determine how much of your income can be used for a monthly mortgage payment after you have met your other monthly debt payments.

How to figure the qualifying ratio

Usually, underwriting for conventional loans needs 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 the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything.

The second number in the ratio is what percent of your gross income every month which can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes payments on credit cards, auto payments, 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 calculate pre-qualification numbers with your own financial data, we offer a Mortgage Qualification Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We'd be happy to go over pre-qualification to determine how much you can afford.

New Millennium Mortgage Co. NMLS: 331173 can answer questions about these ratios and many others. Give us a call at (941) 366-5800.

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