Ratio of Debt-to-Income

The debt to income ratio is a tool lenders use to determine how much of your income is available for your monthly home loan payment after all your other recurring debts are met.

How to figure your qualifying ratio

In general, underwriting for conventional mortgage 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) ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be spent on housing (this includes mortgage principal and interest, PMI, hazard insurance, property tax, and homeowners' association dues).

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 vehicle loans, child support and credit card payments.

For example:

28/36 (Conventional)

• Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
• Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
• Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, please use this Mortgage Pre-Qualifying Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We will be thrilled to go over pre-qualification to help you determine how much you can afford.

Not Your Average Lender can answer questions about these ratios and many others. Call us: 9722039033.