Debt/Income Ratio

The debt to income ratio is a formula lenders use to calculate how much money can be used for a monthly mortgage payment after you meet your other monthly debt payments.

Understanding your qualifying ratio

In general, conventional mortgages require a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

In these ratios, the first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything.

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 car payments, child support and credit card payments.

Examples:

With a 28/36 qualifying 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'd like to run your own numbers, we offer a Loan Qualification Calculator.

Guidelines Only

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

At U.S.A. Lending, Inc., we answer questions about qualifying all the time. Give us a call: 305-967-7200.