Debt/Income Ratio

Your debt to income ratio is a tool lenders use to determine how much money is available for a monthly mortgage payment after all your other recurring debts are met.

How to figure the qualifying ratio

Most conventional mortgage 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 percentage of your gross monthly income that can go to housing costs (this includes loan principal and interest, private mortgage insurance, hazard insurance, property tax, and HOA dues).

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

Examples:

With a 28/36 ratio

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, feel free to use our Loan Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We'd be thrilled to pre-qualify you to help you determine how much you can afford.

Chase Mortgage can answer questions about these ratios and many others. Call us at 435-755-6622.