Debt to Income Ratio

Your debt to income ratio is a formula lenders use to determine how much money is available for your monthly home loan payment after you have met your other monthly debt payments.

How to figure your qualifying ratio

For the most part, 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 gross monthly income that can be spent on housing costs (including mortgage principal and interest, PMI, homeowner's insurance, property taxes, and HOA dues).

The second number in the ratio is what percent of your gross income every month that can be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto/boat payments, child support, etcetera.

For example:

28/36 (Conventional)

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, use this Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We will be thrilled to go over pre-qualification to determine how large a mortgage loan you can afford.

At America's Money Source, we answer questions about qualifying all the time. Call us: 4078987559.


America's Money Source

2306 Curry Ford Rd
Orlando, FL 32806