Debt to Income Ratio

The debt to income ratio is a formula lenders use to determine how much of your income can be used for a monthly home loan payment after you have met your other monthly debt payments.

About your qualifying ratio

In general, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can go to housing costs (this includes loan principal and interest, private mortgage insurance, hazard insurance, taxes, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income that should be spent on housing expenses and recurring debt. Recurring debt includes credit card payments, vehicle payments, child support, and the like.

Some example data:

A 28/36 qualifying ratio

• 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 calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Pre-Qualification Calculator.

Guidelines Only

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

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