Ratio of Debt to Income

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after you have paid your other recurring debts.

Understanding your qualifying ratio

For the most part, underwriting for conventional mortgages needs a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

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

The second number in the ratio is the maximum percentage of your gross monthly income which can be spent on housing expenses and recurring debt together. For purposes of this ratio, debt includes credit card payments, car loans, child support, and the like.

For example:

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, feel free to use our Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

Remember these ratios are just guidelines. We will be happy to help you pre-qualify to help you figure out how much you can afford.

Savers Home Loans can walk you through the pitfalls of getting a mortgage. Call us at (800) 974-0509.