Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you've paid your other monthly debts.

How to figure your qualifying ratio

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

For 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, HOA dues, Private Mortgage Insurance - everything that constitutes the full payment.

The second number is what percent of your gross income every month which can be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto loans, child support, etcetera.

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'd like to run your own numbers, feel free to use our Mortgage Qualifying Calculator.

Guidelines Only

Remember these are just guidelines. We will be thrilled to go over pre-qualification to determine how much 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: (207) 571-8034.