Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after your other recurring debts are paid.

Understanding your qualifying ratio

Most 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) qualifying ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can go to housing costs (this includes mortgage principal and interest, private mortgage insurance, homeowner's insurance, property taxes, and homeowners' association dues).

The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing expenses and recurring debt together. Recurring debt includes things like vehicle loans, child support and monthly credit card payments.

For example:

28/36 (Conventional)

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, feel free to use our Mortgage Qualification Calculator.

Guidelines Only

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

Alternative Mortgage Group can answer questions about these ratios and many others. Call us at 561-395-4264.