Debt to Income Ratio

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

How to figure the qualifying ratio

In general, underwriting for conventional loans requires a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be spent on housing (including principal and interest, PMI, homeowner's insurance, property taxes, and HOA dues).

The second number is what percent of your gross income every month that can be spent on housing expenses and recurring debt together. Recurring debt includes auto/boat payments, child support and credit card payments.

For example:

With a 28/36 qualifying ratio

  • 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 calculate pre-qualification numbers with your own financial data, feel free to use our superb Loan Pre-Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We will be thrilled to help you pre-qualify to help you figure out how large a mortgage loan 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.