Debt/Income Ratio

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after your other monthly debts have been paid.

Understanding your qualifying ratio

Most underwriting for conventional loans requires a qualifying ratio of 28/36. FHA loans are a little 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 applied to housing costs (including principal and interest, private mortgage insurance, hazard insurance, property taxes, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income which can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes payments on credit cards, auto loans, child support, and the like.

Examples:

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'd like to run your own numbers, feel free to use our superb Mortgage Loan Qualification Calculator.

Just Guidelines

Don't forget these ratios are only guidelines. We will be happy to help you pre-qualify to help you determine how large a mortgage loan you can afford.

At U.S.A. Lending, Inc., we answer questions about qualifying all the time. Call us at 305-967-7200.