Ratio of Debt to Income

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

Understanding your qualifying ratio

For the most part, conventional mortgages 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 percentage of your gross monthly income that can go to housing costs (including loan principal and interest, PMI, homeowner's insurance, property tax, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income which can be spent on housing expenses and recurring debt. For purposes of this ratio, debt includes credit card payments, auto payments, child support, etcetera.

Some example data:

A 28/36 ratio

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, feel free to use our very useful Mortgage Pre-Qualifying Calculator.

Guidelines Only

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

Utah Funding can walk you through the pitfalls of getting a mortgage. Give us a call at (949) 486-3777.