Ratio of Debt to Income
The debt to income ratio is a formula lenders use to determine how much money can be used for your monthly mortgage payment after you meet your other monthly debt payments.
About the qualifying ratio
Most conventional mortgages require a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.
The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can go to housing costs (including mortgage principal and interest, PMI, hazard insurance, property tax, and HOA dues).
The second number is the maximum percentage of your gross monthly income that should be spent on housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, auto loans, child support, etcetera.
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'd like to run your own numbers, we offer a Mortgage Qualification Calculator.
Just Guidelines
Remember these ratios are only guidelines. We will be happy to go over pre-qualification to determine how much you can afford.
Price Mortgage Group LLC can walk you through the pitfalls of getting a mortgage. Call us: 405-513-7700.