Debt/Income Ratio

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after your other monthly debts have been paid.

About your 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.

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

The second number is the maximum percentage of your gross monthly income which can be spent on housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, car payments, child support, etcetera.

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 want to calculate pre-qualification numbers on your own income and expenses, use this Mortgage Loan Qualification Calculator.

Guidelines Only

Don't forget these are just guidelines. We'd be happy to go over pre-qualification to help you determine how much you can afford.

The Mortgage Exchange Service LLC can answer questions about these ratios and many others. Call us at 703.255-5810.

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