Debt to Income Ratio

Your ratio of debt to income is a formula lenders use to determine how much money is available for your monthly mortgage payment after you have met your other monthly debt payments.

Understanding your qualifying ratio

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

For these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing costs. 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 can be applied to housing costs and recurring debt. Recurring debt includes auto/boat payments, child support and monthly credit card payments.

Examples:

With a 28/36 ratio

• Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
• Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
• Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Loan Qualification Calculator.