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 the qualifying ratio

Typically, conventional mortgages need a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be applied to housing costs (this includes principal and interest, PMI, homeowner's insurance, property tax, and homeowners' association dues).

The second number is what percent of your gross income every month that should be applied to housing expenses and recurring debt. Recurring debt includes auto loans, child support and credit card payments.

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 calculate pre-qualification numbers on your own income and expenses, feel free to use our very useful Loan Pre-Qualification Calculator.

Guidelines Only

Don't forget these are only guidelines. We will be happy to help you pre-qualify to help you figure out how much you can afford.

Coastal Mortgage Corp. can answer questions about these ratios and many others. Give us a call at 504-866-5626.

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