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Ratio of Debt-to-Income

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

How to figure the qualifying ratio

Most conventional mortgage 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 your gross monthly income that can be spent on housing (including mortgage 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 should be spent on housing expenses and recurring debt. Recurring debt includes credit card payments, auto/boat payments, child support, etcetera.

For example:

28/36 (Conventional)

  • 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'd like to run your own numbers, feel free to use our Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We will be thrilled to go over pre-qualification to determine how much you can afford.

At Greystone Loans, Inc., we answer questions about qualifying all the time. Give us a call: (909) 467-1090.

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