Debt-to-Income Ratio

Your ratio of debt to income is a formula lenders use to determine how much money can be used for your monthly mortgage payment after you meet your various other monthly debt payments.

About the qualifying ratio

Usually, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

The first number is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number in the ratio is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt. Recurring debt includes auto loans, child support and credit card payments.

Some example data:

28/36 (Conventional)

  • 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'd like to run your own numbers, use this Loan Pre-Qualification Calculator.

Just Guidelines

Remember these ratios are just guidelines. We'd be happy to go over pre-qualification to determine how much you can afford.

The Mortgage Partner can walk you through the pitfalls of getting a mortgage. Call us at 8888107112.

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