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

Usually, 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 go to housing (this includes principal and interest, PMI, hazard insurance, property taxes, and HOA dues).

The second number in the ratio is what percent of your gross income every month that can be spent on housing expenses and recurring debt. Recurring debt includes things like auto/boat payments, child support and credit card payments.

For example:

A 28/36 ratio

  • 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 want to run your own numbers, please use this Mortgage Loan Qualification Calculator.

Just Guidelines

Remember these are only guidelines. We'd be happy to go over pre-qualification to help you determine how much you can afford.

Turnkey Mortgage Group - NMLS#70160
David Yeary, Mortgage Loan Originator NMLS#1837725 can answer questions about these ratios and many others. Call us at 7133252099.