Debt/Income Ratio

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after your other monthly debts have been paid.

Understanding your qualifying ratio

In general, conventional mortgage loans require 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 go to housing costs (this includes principal and interest, private mortgage insurance, hazard insurance, property taxes, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income that can be applied to housing expenses and recurring debt. Recurring debt includes auto/boat payments, child support and monthly credit card payments.

For example:

A 28/36 ratio

  • 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 want to run your own numbers, feel free to use our Mortgage Qualifying Calculator.

Guidelines Only

Don't forget these ratios are only guidelines. We will be thrilled to pre-qualify you to help you determine how much you can afford.

Pacificwide Lending can answer questions about these ratios and many others. Call us at 9254610500.

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Pacificwide Lending

CA License #01762647 NMLS#241222, TX License #241222, FL License # MBR 3291

7041 Koll Center Pkwy Ste 270 Ste 270
Pleasanton, CA 94566