Debt to Income Ratio

Your ratio of debt to income is a formula lenders use to calculate how much of your income can be used for a monthly mortgage payment after you meet your various other monthly debt payments.

About your qualifying ratio

In general, underwriting for conventional mortgages requires a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can go to housing (this includes loan principal and interest, PMI, homeowner's insurance, property tax, 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. For purposes of this ratio, debt includes credit card payments, auto payments, child support, and the like.

Examples:

28/36 (Conventional)

  • 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 with your own financial data, please use this Mortgage Loan Qualification Calculator.

Guidelines Only

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

Norcal Capital Group, Inc can answer questions about these ratios and many others. Call us: 6507631924.

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Norcal Capital Group, Inc

1369 El Camino Real
Millbrae, CA 94030