Ratio of Debt-to-Income

The ratio of debt to income is a formula lenders use to calculate how much money is available for a monthly home loan payment after you have met your various other monthly debt payments.

How to figure your qualifying ratio

Usually, conventional loans require a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything that constitutes the full payment.

The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing costs and recurring debt. Recurring debt includes payments on credit cards, auto payments, child support, etcetera.

Examples:

28/36 (Conventional)

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, use this Mortgage Loan Qualifying Calculator.

Guidelines Only

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

At Peerless Residential Mortgage, we answer questions about qualifying all the time. Give us a call: (513) 713-1515.

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