Debt/Income Ratio

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

Understanding your qualifying ratio

Most underwriting for conventional mortgage loans requires a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (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 (including loan principal and interest, private mortgage insurance, homeowner's insurance, property taxes, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income that should be applied to housing costs and recurring debt. Recurring debt includes things like auto payments, child support and monthly credit card payments.

Examples:

28/36 (Conventional)

  • 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 run your own numbers, feel free to use our very useful Mortgage Loan Pre-Qualifying Calculator.

Just Guidelines

Remember these are just guidelines. We will be happy to pre-qualify you to help you determine how large a mortgage you can afford.

Evolution Mortgage Inc. can walk you through the pitfalls of getting a mortgage. Call us at 631-273-1188.

Questions about DTI Ratios?

Please complete the short form below and one of our Mortgage Specialists will contact you personally to answer your questions.

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