Debt-to-Income Ratio

Your ratio of debt to income is a formula lenders use to determine how much of your income is available for your monthly home loan payment after all your other monthly debts are met.

Understanding the qualifying ratio

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

For these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything that makes up the full payment.

The second number is the maximum percentage of your gross monthly income that should be applied to housing expenses and recurring debt. Recurring debt includes payments on credit cards, auto/boat loans, child support, etcetera.

For example:

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 calculate pre-qualification numbers with your own financial data, use this Loan Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We'd be happy to help you pre-qualify to determine how large a mortgage loan you can afford.

Nationwide Home Loans can walk you through the pitfalls of getting a mortgage. Call us at (562) 693-5048.

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