Ratio of Debt-to-Income

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

Understanding your qualifying ratio

Usually, conventional loans need 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.

The first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, car payments, child support, etcetera.

Some example data:

A 28/36 qualifying ratio

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, use this Loan Qualification Calculator.

Guidelines Only

Don't forget these are just guidelines. We'd be thrilled to pre-qualify you to determine how large a mortgage loan you can afford.

U.S.A. Lending, Inc. can walk you through the pitfalls of getting a mortgage. Give us a call at 305-967-7200.