Ratio of Debt-to-Income

The debt to income ratio is a formula lenders use to determine how much money can be used for your monthly home loan payment after all your other recurring debts are fulfilled.

Understanding the qualifying ratio

Usually, underwriting for conventional mortgage 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.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be applied to housing (this includes principal and interest, private mortgage insurance, homeowner's insurance, taxes, and HOA dues).

The second number is what percent of your gross income every month that should be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto/boat loans, child support, etcetera.

For example:

With a 28/36 qualifying ratio

  • 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, please use this Mortgage Pre-Qualifying Calculator.

Just Guidelines

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

Alternative Mortgage Group can walk you through the pitfalls of getting a mortgage. Give us a call at 561-395-4264.