Debt-to-Income Ratio

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

Understanding the qualifying ratio

In general, underwriting for conventional loans needs 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 in a qualifying ratio is the maximum percentage of your gross monthly income that can go to housing costs (this includes principal and interest, private mortgage insurance, homeowner's insurance, property taxes, and homeowners' association dues).

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

For example:

A 28/36 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 run your own numbers, use this Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

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

Harbor View Lending* a DBA of Megastar Financial can walk you through the pitfalls of getting a mortgage. Give us a call: (207) 571-8034.