Ratio of Debt to Income

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The ratio of debt to income is a tool lenders use to calculate how much money can be used for a monthly mortgage payment after all your other recurring debt obligations have been fulfilled.

About your qualifying ratio

Typically, underwriting for conventional loans needs a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be spent on housing (this includes loan principal and interest, private mortgage insurance, hazard insurance, property tax, and HOA dues).

The second number is what percent of your gross income every month which can be spent on housing costs and recurring debt. Recurring debt includes things like car loans, child support and monthly credit card payments.

Examples:

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, we offer a Loan Pre-Qualification Calculator.

Just Guidelines

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

CFC Mortgage Bankers can walk you through the pitfalls of getting a mortgage. Call us at (805) 432-4898.