Debt to Income Ratio

Your debt to income ratio is an effeective way to determining how much money is available for your monthly mortgage payment after all your other recurring debt obligations have been met.

Debt limit

There is generally a debt limit associated with each type of mortgage loan, such as a front/back (28/36) qualifying ratio for a conventional mortgage loan. These qualifying ratios are guidelines are used by lenders and having An excellent credit history can assist you  to qualify for a mortgage loan even if your debt load is over and above the ratio limits. 

Understanding the qualifying ratio

Typically conventional mortgage loans have a front and back qualifying ratio of 28/36. Typically an FHA loan will allow for a higher debt load, reflected in a higher front/back (29/41) qualifying ratio. The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be used to housing (including loan principal and interest, private mortgage insurance, hazard insurance, property taxes and homeowner's association dues). The second number is the maximum percentage of your gross monthly income that can be used to housing expenses and recurring debt. Recurring debt includes things like car loans, child support and monthly credit card payments.  For example:   With a 28/36 qualifying ratio: 

• Front End Ratio - Gross monthly income of $3,500 x .28 = $980 can be used to housing

• Back End Ratio - Gross monthly income of $3,500 x .36 = $1,260 can be used to recurring debt plus housing expenses

 With a 29/41 qualifying ratio: 

• Front End Ratio - Gross monthly income of $3,500 x .29 = $1,015 can be used to housing

• Back End Ratio - Gross monthly income of $3,500 x .41 = $1,435 can be used to recurring debt plus housing expenses

Simply guidelines

Remember these are just typical guidelines. We wil be happy to pre-qualify your reports to determine how much of a mortgage loan you can afford.  We look forward to assisting you purchase your next home.