Debt-to-Income Ratio

Your debt to income ratio is a tool lenders use to calculate how much of your income is available for a monthly home loan payment after all your other monthly debt obligations are met.

How to figure the qualifying ratio

Most underwriting for conventional mortgages requires a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

The first number is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything.

The second number is what percent of your gross income every month that should be spent on housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, car payments, child support, etcetera.

Examples:

28/36 (Conventional)

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 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 Qualification Calculator.

Just Guidelines

Remember these are only guidelines. We'd be happy to pre-qualify you to determine how much you can afford.

At One Source Lending 303-220-7500, we answer questions about qualifying all the time. Call us: 303-220-7500.