Debt/Income Ratio

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

About your qualifying ratio

In general, conventional mortgages require 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 is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' 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 which can be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, auto payments, child support, and the like.

Some example data:

A 28/36 ratio

  • 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 want to calculate pre-qualification numbers on your own income and expenses, use this Mortgage Qualification Calculator.

Guidelines Only

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

At Norcal Capital Group, Inc, we answer questions about qualifying all the time. Call us: 6507631924.

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Norcal Capital Group, Inc

1369 El Camino Real
Millbrae, CA 94030