Debt to Income Ratio

The ratio of debt to income is a formula lenders use to calculate how much of your income can be used for a monthly mortgage payment after you meet your various other monthly debt payments.

How to figure your qualifying ratio

For the most part, conventional mortgages require a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

In these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything.

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

For example:

28/36 (Conventional)

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, feel free to use our very useful Loan Pre-Qualification Calculator.

Just Guidelines

Don't forget these are just guidelines. We'd be thrilled to go over pre-qualification to help you determine how much you can afford.

One Source Lending 303-220-7500 can walk you through the pitfalls of getting a mortgage. Give us a call at 303-220-7500.