Ratio of Debt to Income

The debt to income ratio is a formula lenders use to calculate how much of your income can be used for a monthly mortgage payment after you meet your other monthly debt payments.

Understanding the qualifying ratio

Usually, underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

In these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month which can be applied to housing costs and recurring debt together. Recurring debt includes car payments, child support and credit card payments.

For example:

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 calculate pre-qualification numbers with your own financial data, please use this Mortgage Loan Pre-Qualifying Calculator.

Guidelines Only

Remember these are just guidelines. We'd be thrilled to pre-qualify you to help you figure out how large a mortgage loan you can afford.

Americn Hero Mortgage can answer questions about these ratios and many others. Give us a call: 754-202-4376.

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