Debt-to-Income Ratio

Your debt to income ratio is a formula lenders use to determine how much money is available for a monthly mortgage payment after you meet your various other monthly debt payments.

How to figure the qualifying ratio

Most conventional loans need 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 is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything that makes up the payment.

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

Some example data:

With a 28/36 qualifying ratio

  • 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 run your own numbers, we offer a Loan Pre-Qualification Calculator.

Guidelines Only

Remember these ratios are just guidelines. We will be happy to help you pre-qualify to help you figure out how much you can afford.

The Mortgage Exchange Service LLC can answer questions about these ratios and many others. Give us a call: 703.255-5810.

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