Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other monthly debts have been paid.

Understanding your qualifying ratio

For the most part, conventional loans require a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

In these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything that constitutes the payment.

The second number in the ratio is what percent of your gross income every month that can be applied to housing expenses and recurring debt together. Recurring debt includes auto payments, child support and credit card payments.

Some example data:

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'd like to run your own numbers, feel free to use our very useful Loan Pre-Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We will be happy to go over pre-qualification to help you determine how large a mortgage you can afford.

At Primemax Mortgage Group, NMLS#195523, we answer questions about qualifying all the time. Give us a call: 2565439211.