Debt/Income Ratio
Your ratio of debt to income is a formula lenders use to determine how much money is available for your monthly mortgage payment after all your other recurring debt obligations have been fulfilled.
About the qualifying ratio
Most underwriting for conventional mortgages requires 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 your gross monthly income that can be spent on housing costs (including loan principal and interest, PMI, homeowner's insurance, property taxes, and homeowners' association dues).
The second number is what percent of your gross income every month that should be spent on housing expenses and recurring debt. Recurring debt includes auto loans, child support and credit card payments.
For example:
28/36 (Conventional)
- 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 run your own numbers, feel free to use our very useful Mortgage Loan Qualifying Calculator.
Just Guidelines
Don't forget these ratios are just guidelines. We'd be happy to help you pre-qualify to determine how large a mortgage you can afford.
U.S.A. Lending, Inc. can answer questions about these ratios and many others. Call us: 305-967-7200.