Ratio of Debt to Income
Your debt to income ratio is a formula lenders use to calculate how much of your income can be used for your monthly mortgage payment after all your other monthly debts have been met.
About your qualifying ratio
In general, underwriting for conventional loans needs 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 gross monthly income that can go to housing (including mortgage principal and interest, PMI, homeowner's insurance, property tax, and homeowners' association dues).
The second number in the ratio is the maximum percentage of your gross monthly income which can be spent on housing expenses and recurring debt. Recurring debt includes payments on credit cards, vehicle payments, child support, etcetera.
For example:
With a 28/36 qualifying ratio
- 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 run your own numbers, please use this Loan Pre-Qualifying Calculator.
Guidelines Only
Remember these ratios are just guidelines. We'd be happy to go over pre-qualification to help you figure out how large a mortgage you can afford.
At U.S.A. Lending, Inc., we answer questions about qualifying all the time. Call us at 305-967-7200.