Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after your other monthly debts are paid.

How to figure the qualifying ratio

For the most part, underwriting for conventional loans requires a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be applied to housing (this includes loan principal and interest, private mortgage insurance, homeowner's insurance, property tax, and homeowners' association dues).

The second number in the ratio is what percent of your gross income every month that can be spent on housing costs and recurring debt together. Recurring debt includes payments on credit cards, vehicle payments, child support, and the like.

Some example data:

28/36 (Conventional)

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Pre-Qualification Calculator.

Just Guidelines

Remember these are only guidelines. We will be happy to go over pre-qualification to help you 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.