Debt-to-Income Ratio

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after your other monthly debts are paid.

About your qualifying ratio

In general, 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 loan principal and interest, private mortgage insurance, homeowner's insurance, property tax, and homeowners' association dues).

The second number in the ratio is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt. Recurring debt includes things like car loans, child support and credit card payments.

Some example data:

28/36 (Conventional)

  • 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'd like to calculate pre-qualification numbers on your own income and expenses, please use this Loan Pre-Qualification Calculator.

Just Guidelines

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

Carter Financial Solutions can walk you through the pitfalls of getting a mortgage. Give us a call at 866-840-8745 x2.