Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after your other recurring debts are paid.

About the qualifying ratio

Most conventional mortgages need 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 your gross monthly income that can be spent on housing (including mortgage principal and interest, private mortgage insurance, homeowner's insurance, property tax, and homeowners' association 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 together. For purposes of this ratio, debt includes credit card payments, auto/boat payments, child support, and the like.

For example:

A 28/36 qualifying ratio

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Loan Qualifying Calculator.

Just Guidelines

Remember these ratios are only guidelines. We will be happy to go over pre-qualification to help you determine how large a mortgage you can afford.

Norcal Capital Group, Inc can walk you through the pitfalls of getting a mortgage. Give us a call: (650) 689-5684.

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