Ratio of Debt-to-Income

The debt to income ratio is a tool lenders use to calculate how much of your income is available for your monthly mortgage payment after you meet your various other monthly debt payments.

About your qualifying ratio

Usually, underwriting for conventional loans requires a qualifying ratio of 28/36. FHA loans are 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, HOA dues, Private Mortgage Insurance - everything that constitutes the full payment.

The second number is what percent of your gross income every month which can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, car payments, child support, and the like.

For example:

A 28/36 qualifying ratio

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, feel free to use our Mortgage Loan Pre-Qualification Calculator.

Just Guidelines

Don't forget these ratios are only guidelines. We'd be happy to pre-qualify you to help you determine how large a mortgage loan you can afford.

At Norcal Capital Group, Inc, we answer questions about qualifying all the time. Give us a call at 6507631924.

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Norcal Capital Group, Inc

1369 El Camino Real
Millbrae, CA 94030