Debt to Income Ratio

Your ratio of debt to income is a tool lenders use to calculate how much money is available for your monthly mortgage payment after you have met your various other monthly debt payments.

Understanding the qualifying ratio

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

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be applied to housing costs (including loan principal and interest, private mortgage insurance, homeowner's insurance, property tax, and homeowners' association dues).

The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing expenses and recurring debt. For purposes of this ratio, debt includes credit card payments, auto/boat payments, child support, and the like.

For example:

With a 28/36 qualifying 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 calculate pre-qualification numbers on your own income and expenses, we offer a Loan Qualification Calculator.

Just Guidelines

Don't forget these are only guidelines. We'd be happy to help you pre-qualify to help you determine how much you can afford.

Utah Funding can answer questions about these ratios and many others. Call us at (949) 486-3777.