Ratio of Debt-to-Income

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

Understanding your qualifying ratio

For the most part, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

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, HOA dues, Private Mortgage Insurance - everything that makes up the payment.

The second number is the maximum percentage of your gross monthly income which can be spent on housing expenses and recurring debt together. Recurring debt includes things like vehicle loans, child support and credit card payments.

Examples:

28/36 (Conventional)

  • 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 want to run your own numbers, use this Mortgage Qualification Calculator.

Just Guidelines

Don't forget these are only guidelines. We'd be happy to help you pre-qualify to determine how large a mortgage you can afford.

Harbor View Lending* a DBA of Megastar Financial can walk you through the pitfalls of getting a mortgage. Give us a call at (207) 571-8034.