Debt to Income Ratio

Your ratio of debt to income is a tool lenders use to determine how much money is available for your monthly mortgage payment after all your other recurring debt obligations are met.

How to figure your qualifying ratio

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

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can go to housing costs (including loan principal and interest, PMI, hazard insurance, property tax, and HOA dues).

The second number in the ratio is what percent of your gross income every month that can be spent on housing costs and recurring debt together. Recurring debt includes payments on credit cards, auto loans, child support, and the like.

For example:

With a 28/36 ratio

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, feel free to use our very useful Mortgage Qualification Calculator.

Just Guidelines

Remember these are just guidelines. We'd be happy to go over pre-qualification to determine how much you can afford.

One Source Lending 303-220-7500 can walk you through the pitfalls of getting a mortgage. Call us at 303-220-7500.