Debt-to-Income Ratio

Your ratio of debt to income is a tool lenders use to determine how much money is available for your monthly home loan payment after you have met your various other monthly debt payments.

How to figure your qualifying ratio

In general, conventional loans need a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be applied to housing costs (this includes loan principal and interest, private mortgage insurance, hazard insurance, taxes, and homeowners' association dues).

The second number in the ratio is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, car payments, child support, and the like.

For example:

28/36 (Conventional)

  • 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 want to run your own numbers, we offer a Loan Qualification Calculator.

Guidelines Only

Don't forget these are just guidelines. We will be happy to pre-qualify you to determine how much you can afford.

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

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