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 the qualifying ratio

In general, conventional mortgage loans require 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 percentage of your gross monthly income that can go to housing costs (this includes mortgage principal and interest, PMI, hazard insurance, property taxes, and HOA dues).

The second number in the ratio is what percent of your gross income every month that should be applied to housing expenses and recurring debt. For purposes of this ratio, debt includes credit card payments, car loans, child support, etcetera.

Examples:

A 28/36 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 want to run your own numbers, please use this Mortgage Qualifying Calculator.

Guidelines Only

Remember these are just guidelines. We will be thrilled to help you pre-qualify to determine how large a mortgage loan you can afford.

U.S.A. Lending, Inc. can answer questions about these ratios and many others. Call us at 305-967-7200.