Debt-to-Income Ratio

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you have paid your other monthly loans.

How to figure your qualifying ratio

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

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

The second number in the ratio is what percent of your gross income every month which can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, car loans, child support, and the like.

For example:

A 28/36 ratio

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, feel free to use our very useful Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

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

Savers Home Loans can answer questions about these ratios and many others. Call us at (800) 974-0509.