Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after you have paid your other recurring debts.

How to figure your qualifying ratio

For the most part, conventional loans require 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 percentage of gross monthly income that can be applied to housing (including mortgage 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 spent on housing costs and recurring debt. Recurring debt includes things like auto/boat payments, child support and monthly credit card payments.

For example:

With a 28/36 qualifying ratio

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, please use this Mortgage Loan Pre-Qualifying Calculator.

Guidelines Only

Remember these ratios are just guidelines. We'd be thrilled to pre-qualify you to determine how large a mortgage you can afford.

Contemporary Mortgage Services, Inc can walk you through the pitfalls of getting a mortgage. Give us a call at 407-834-3377.

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