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Debt/Income Ratio

Your debt to income ratio is a tool lenders use to calculate how much money can be used for a monthly mortgage payment after all your other monthly debt obligations have been met.

Understanding the qualifying ratio

Usually, conventional 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 your gross monthly income that can be spent on housing costs (including mortgage principal and interest, PMI, hazard insurance, property tax, and homeowners' association dues).

The second number in the ratio is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt together. Recurring debt includes vehicle loans, child support and monthly credit card payments.

Some example data:

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'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our superb Mortgage Loan Pre-Qualifying Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We will be thrilled to help you pre-qualify to help you determine how much you can afford.

One Source Lending 303-220-7500 can answer questions about these ratios and many others. Give us a call: 303-220-7500.