Debt-to-Income Ratio

Your ratio of debt to income is a tool lenders use to determine how much of your income is available for a monthly mortgage payment after you have met your various other monthly debt payments.

About the qualifying ratio

Most conventional loans require a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, homeowners' 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 spent on housing costs and recurring debt together. Recurring debt includes payments on credit cards, auto/boat payments, child support, and the like.

Examples:

28/36 (Conventional)

• 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 run your own numbers, use this Loan Pre-Qualifying Calculator.

Guidelines Only

Remember these ratios are only guidelines. We will be thrilled to pre-qualify you to help you figure out how much you can afford.

Forum Mortgage Bancorp can answer questions about these ratios and many others. Give us a call at (773) 774-9040 Ext 121.