Debt to Income Ratio

Your ratio of debt to income is a tool lenders use to calculate how much of your income is available for your monthly mortgage payment after all your other recurring debt obligations are met.

Understanding the qualifying ratio

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

For these ratios, the first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything that constitutes the full payment.

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. Recurring debt includes things like auto/boat loans, child support and monthly credit card payments.

For example:

With a 28/36 ratio

  • 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 want to run your own numbers, we offer a Mortgage Loan Qualifying Calculator.

Guidelines Only

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

At America's Money Source, we answer questions about qualifying all the time. Give us a call: (407) 898-7559.

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