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Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after your other recurring debts have been paid.

About your qualifying ratio

Usually, underwriting for conventional mortgages needs a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be spent on housing costs (including loan principal and interest, PMI, homeowner's insurance, property tax, and homeowners' association dues).

The second number in the ratio is what percent of your gross income every month which can be spent on housing expenses and recurring debt. For purposes of this ratio, debt includes credit card payments, auto loans, child support, etcetera.

Some example data:

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, we offer a Mortgage Qualification Calculator.

Just Guidelines

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

Town & Country Home Loans, Inc. can answer questions about these ratios and many others. Give us a call at (760)789-9995.

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