Debt/Income Ratio

The debt to income ratio is a formula lenders use to determine how much of your income can be used for a monthly home loan payment after you have met your other monthly debt payments.

How to figure the qualifying ratio

In general, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be applied to housing (this includes mortgage principal and interest, private mortgage insurance, hazard insurance, taxes, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing costs and recurring debt. Recurring debt includes payments on credit cards, auto payments, child support, etcetera.

For example:

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'd like to calculate pre-qualification numbers on your own income and expenses, please use this Loan Pre-Qualifying Calculator.

Just Guidelines

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

Debbie Oliver NMLS License #248252, America's First Choice Mortgage, NMLS License #279234 can walk you through the pitfalls of getting a mortgage. Call us: 214-663-5355.