Ratio of Debt to Income

The debt to income ratio is a formula lenders use to calculate how much of your income can be used for a monthly mortgage payment after all your other recurring debt obligations are fulfilled.

How to figure your qualifying ratio

For the most part, 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 your gross monthly income that can go to housing (this includes loan principal and interest, private mortgage insurance, hazard insurance, property tax, and HOA dues).

The second number is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto/boat payments, child support, etcetera.

Examples:

A 28/36 qualifying ratio

  • 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 with your own financial data, feel free to use our Mortgage Loan Qualification Calculator.

Just Guidelines

Remember these ratios are just guidelines. We will be thrilled to help you pre-qualify to determine how large a mortgage you can afford.

Affirm Home Loans can walk you through the pitfalls of getting a mortgage. Call us at (972) 292-0448.

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