Debt to Income Ratio

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after you've paid your other monthly loans.

How to figure the qualifying ratio

Typically, conventional loans require 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.

For 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, HOA dues, Private Mortgage Insurance - everything that constitutes the full payment.

The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing costs and recurring debt together. Recurring debt includes payments on credit cards, vehicle loans, child support, and the like.

Some example data:

With 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 want to calculate pre-qualification numbers with your own financial data, feel free to use our superb Loan Pre-Qualifying Calculator.

Guidelines Only

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

Norcal Capital Group, Inc can answer questions about these ratios and many others. Give us a call at (650) 689-5684.

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