Debt to Income Ratios

Ratio of Debt to Income

Lenders use a ratio called “debt to income” to determine your maximum monthly payment after you have paid your other monthly debts.

How to figure your qualifying ratio

For the most part, underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be applied to housing costs (including mortgage principal and interest, private mortgage insurance, homeowner’s insurance, property tax, and HOA dues).

The second number is what percent of your gross income every month that can be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto/boat loans, child support, and the like.

Some example data:

A 28/36 qualifying ratio

  • 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

Just Guidelines

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