Ratio of Debt-to-Income

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

About your qualifying ratio

Typically, conventional mortgages require 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 percentage of your gross monthly income that can be applied to housing costs (this includes mortgage principal and interest, PMI, hazard insurance, property taxes, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income that should be applied to housing costs and recurring debt together. Recurring debt includes payments on credit cards, vehicle payments, child support, etcetera.

For example:

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'd like to run your own numbers, use this Loan Pre-Qualifying Calculator.

Just Guidelines

Remember these ratios are only guidelines. We'd be thrilled to pre-qualify you to help you figure out how much you can afford.

Foxfield Financial can answer questions about these ratios and many others. Give us a call: 720-598-8300.

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