Ratio of Debt to Income

Your debt to income ratio is a formula lenders use to calculate how much of your income can be used for a monthly home loan payment after you have met your various other monthly debt payments.

How to figure the qualifying ratio

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

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be applied to housing (including loan principal and interest, PMI, hazard 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. Recurring debt includes things like auto/boat payments, child support and credit card payments.

Examples:

A 28/36 qualifying 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 calculate pre-qualification numbers with your own financial data, use this Mortgage Loan Pre-Qualification Calculator.

Just Guidelines

Remember these ratios are only guidelines. We'd be thrilled to pre-qualify you to help you figure out how much you can afford.

At Savers Home Loans, we answer questions about qualifying all the time. Give us a call at (800) 974-0509.