Ratio of Debt-to-Income

The ratio of debt to income is a formula lenders use to calculate how much money is available for a monthly home loan payment after you meet your other monthly debt payments.

Understanding your qualifying ratio

Typically, conventional mortgage loans require 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 how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything that constitutes the payment.

The second number in the ratio 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, vehicle loans, child support, etcetera.

Examples:

28/36 (Conventional)

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, please use this Mortgage Loan Qualifying Calculator.

Guidelines Only

Don't forget these are just guidelines. We will be thrilled to go over pre-qualification to help you determine how large a mortgage you can afford.

At Harbor View Lending* a DBA of Megastar Financial, we answer questions about qualifying all the time. Give us a call: (207) 571-8034.