Debt to Income Ratio

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The debt to income ratio is a tool lenders use to determine how much of your income is available for your monthly mortgage payment after all your other monthly debt obligations are fulfilled.

Understanding the qualifying ratio

For the most part, underwriting for conventional mortgages needs a qualifying ratio of 28/36. FHA loans are less restrictive, 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 homeowners' insurance, HOA dues, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month that can be spent on housing expenses and recurring debt together. Recurring debt includes things like vehicle payments, child support and credit card payments.

For example:

28/36 (Conventional)

• 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'd like to run your own numbers, use this Mortgage Pre-Qualifying Calculator.

Just Guidelines

Remember these ratios are just guidelines. We'd be happy to help you pre-qualify to help you determine how much you can afford.

Florida State Mortgage Group, Inc. can walk you through the pitfalls of getting a mortgage. Call us: 954-359-3000.