Debt-to-Income Ratio

The debt to income ratio is a tool lenders use to determine how much money can be used for your monthly mortgage payment after you have met your other monthly debt payments.

How to figure your qualifying ratio

Usually, conventional loans require 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 is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything that makes up the full payment.

The second number is the maximum percentage of your gross monthly income that should be spent on housing costs and recurring debt together. Recurring debt includes auto/boat payments, child support and credit card payments.

Some example data:

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 superb Mortgage Qualification Calculator.

Just Guidelines

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

Foxfield Financial can walk you through the pitfalls of getting a mortgage. Call us: 720-598-8300.

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