Debt/Income Ratio

The ratio of debt to income is a formula lenders use to calculate how much of your income is available for a monthly home loan payment after you meet your other monthly debt payments.

How to figure the qualifying ratio

Typically, conventional 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 is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything that makes up the full payment.

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

Some example data:

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 want to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We will be thrilled to go over pre-qualification to determine how large a mortgage loan you can afford.

At Foxfield Financial, we answer questions about qualifying all the time. Call us: 720-598-8300.

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