Ratio of Debt-to-Income

Your ratio of debt to income is a tool lenders use to determine how much money can be used for your monthly home loan payment after all your other recurring debt obligations are fulfilled.

About your qualifying ratio

Most underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

In these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything.

The second number in the ratio is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt. Recurring debt includes payments on credit cards, vehicle payments, child support, and the like.

Some example data:

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 calculate pre-qualification numbers on your own income and expenses, feel free to use our Loan Qualification Calculator.

Just Guidelines

Remember these are only guidelines. We'd be happy to help you pre-qualify to help you determine how large a mortgage loan you can afford.

America's Money Source can answer questions about these ratios and many others. Give us a call: (407) 898-7559.

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