Debt-to-Income Ratio

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

About your qualifying ratio

In general, conventional loans need 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.

In these ratios, the first number is the percentage of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything that makes up the payment.

The second number is what percent of your gross income every month that should be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto/boat loans, 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'd like to run your own numbers, we offer a Mortgage Qualification Calculator.

Guidelines Only

Don't forget these are only guidelines. We will be happy to help you pre-qualify to determine how large a mortgage 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.