Ratio of Debt-to-Income

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


Understanding your qualifying ratio

In general, underwriting for conventional loans requires a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

In these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything that makes up the payment.

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

Some example data:

With 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'd like to calculate pre-qualification numbers on your own income and expenses, please use this Mortgage Loan Pre-Qualifying Calculator.

Don't forget these are just guidelines. We will be happy to help you pre-qualify to help you determine how large a mortgage loan you can afford. At Laser Lending, we answer questions about qualifying all the time. Call us at 801.999.0493. Ready to begin? Apply Here.

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