Debt/Income Ratio

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after your other recurring debts have been paid.

About your qualifying ratio

Usually, 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 amount (as a percentage) of gross monthly income that can be spent on housing costs (this includes loan principal and interest, PMI, hazard insurance, property tax, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing expenses and recurring debt. Recurring debt includes things like auto/boat payments, child support and monthly credit card payments.

Some example data:

28/36 (Conventional)

  • 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 calculate pre-qualification numbers with your own financial data, feel free to use our superb Mortgage Pre-Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We'd be thrilled to go over pre-qualification to help you figure out how large a mortgage you can afford.

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