Debt to Income Ratio

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

Understanding your qualifying ratio

For the most part, underwriting for conventional mortgages needs 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 your gross monthly income that can go to housing costs (including principal and interest, private mortgage insurance, homeowner's insurance, property tax, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income that should be applied to housing expenses and recurring debt together. Recurring debt includes car loans, child support and monthly credit card payments.

Some example data:

A 28/36 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, use this Mortgage Loan Pre-Qualifying Calculator.

Just Guidelines

Remember these are only guidelines. We'd be happy to go over pre-qualification to help you figure out how much you can afford.

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