Ratio of Debt to Income

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after you've paid your other monthly debts.

Understanding your qualifying ratio

Typically, conventional loans 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 amount (as a percentage) of gross monthly income that can be applied to housing costs (including mortgage principal and interest, PMI, homeowner's insurance, property taxes, and HOA dues).

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

For example:

A 28/36 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 want to run your own numbers, please use this Loan Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We will be happy to pre-qualify you to help you figure out how large a mortgage loan you can afford.

Boardwalk Mortgage can walk you through the pitfalls of getting a mortgage. Give us a call: 1-800-606-2794.