Debt-to-Income Ratio

The debt to income ratio 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.

How to figure your qualifying ratio

Usually, underwriting for conventional mortgages needs a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

In these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything that makes up the full payment.

The second number in the ratio is the maximum percentage of your gross monthly income that should be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto/boat payments, child support, and the like.

Some example data:

28/36 (Conventional)

• Gross monthly income of \$3,500 x .28 = \$980 can be applied to housing
• Gross monthly income of \$3,500 x .36 = \$1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of \$3,500 x .29 = \$1,015 can be applied to housing
• Gross monthly income of \$3,500 x .41 = \$1,435 can be applied to recurring debt plus housing expenses

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

Just Guidelines

Don't forget these are only guidelines. We will be happy to go over pre-qualification to help you figure out how much you can afford.