Ratio of Debt to Income

Your debt to income ratio is a tool lenders use to calculate how much of your income is available for a monthly mortgage payment after you meet your other monthly debt payments.

Understanding your qualifying ratio

Usually, underwriting for conventional mortgage 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 amount (as a percentage) of your gross monthly income that can be spent on housing (this includes mortgage principal and interest, private mortgage insurance, homeowner's insurance, taxes, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income which can be applied to housing expenses and recurring debt. For purposes of this ratio, debt includes credit card payments, vehicle loans, child support, etcetera.

Examples:

28/36 (Conventional)

  • 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

If you'd like to run your own numbers, we offer a Mortgage Loan Qualifying Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We'd be happy to go over pre-qualification to help you figure out how large a mortgage you can afford.

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