Ratio of Debt-to-Income

The ratio of debt to income is a formula lenders use to determine how much money can be used for a monthly mortgage payment after all your other recurring debts have been fulfilled.

About the qualifying ratio

Usually, underwriting for conventional loans requires a qualifying ratio of 28/36. FHA loans are a little less restrictive, 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 go to housing costs (this includes principal and interest, private mortgage insurance, homeowner's insurance, property tax, and HOA dues).

The second number is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes payments on credit cards, auto loans, child support, and the like.

Some example data:

A 28/36 qualifying ratio

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Pre-Qualification Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We'd be thrilled to help you pre-qualify to help you figure out how much you can afford.

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