Ratio of Debt-to-Income

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

How to figure the qualifying ratio

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

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be applied to housing (including loan principal and interest, private mortgage insurance, homeowner's insurance, property tax, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing costs and recurring debt together. Recurring debt includes things like vehicle loans, child support and credit card payments.

For example:

With a 28/36 qualifying ratio

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, please use this Mortgage Loan Qualification Calculator.

Just Guidelines

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

Coastal Mortgage Corp. can walk you through the pitfalls of getting a mortgage. Call us: 504-866-5626.

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