Debt to Income Ratio

Your ratio of debt to income is a formula lenders use to determine how much of your income is available for your monthly mortgage payment after all your other recurring debts are met.


Understanding the qualifying ratio

Typically, underwriting for conventional loans needs 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.

In these ratios, the first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything that makes up the full payment.

The second number is what percent of your gross income every month that can be applied to housing expenses and recurring debt. For purposes of this ratio, debt includes credit card payments, vehicle payments, child support, et cetera.

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, we offer a Mortgage Loan Pre-Qualification Calculator.

Remember these are only guidelines. We will be thrilled to go over pre-qualification to help you determine how much you can afford. At Tigers Community Credit Union, we answer questions about qualifying all the time. Call us: 573-443-8462. Ready to get started? Apply Online Now.

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