Debt-to-Income Ratio

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

Understanding the qualifying ratio

Usually, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything.

The second number is the maximum percentage of your gross monthly income that should be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, auto payments, child support, etcetera.

For example:

With a 28/36 qualifying ratio

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, use this Loan Qualifying Calculator.

Just Guidelines

Remember these ratios are only guidelines. We'd be thrilled to pre-qualify you to determine how large a mortgage loan 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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