Ratio of Debt to Income

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

How to figure the qualifying ratio

Usually, conventional mortgages need a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be spent on housing costs (including mortgage principal and interest, PMI, hazard insurance, property taxes, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income which can be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes credit card payments, vehicle loans, child support, etcetera.

Some example data:

28/36 (Conventional)

• Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
• Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
• Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, we offer a Mortgage Pre-Qualifying Calculator.

Just Guidelines

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

Mortgage Headquarters of Missouri, Inc can walk you through the pitfalls of getting a mortgage. Call us: 5733029990.