Debt-to-Income Ratio

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

About the qualifying ratio

Typically, underwriting for conventional mortgage loans requires 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 amount (as a percentage) of your gross monthly income that can be spent on housing costs (including principal and interest, PMI, hazard insurance, property tax, and homeowners' association dues).

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

Some example data:

With a 28/36 ratio

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 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 Mortgage Qualification Calculator.

Just Guidelines

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