Debt/Income Ratio

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

Understanding the qualifying ratio

For the most part, underwriting for conventional loans needs 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 costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything that constitutes the full payment.

The second number in the ratio is what percent of your gross income every month that should be spent on housing expenses and recurring debt. For purposes of this ratio, debt includes payments on credit cards, vehicle payments, child support, and the like.

For example:

A 28/36 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 want to run your own numbers, feel free to use our Mortgage Qualification Calculator.

Just Guidelines

Remember these are just guidelines. We will be happy to go over pre-qualification to help you determine how much you can afford.

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

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