Debt to Income Ratio

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

About your qualifying ratio

Usually, conventional loans need a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

In these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number is the maximum percentage of your gross monthly income that should be spent on housing expenses and recurring debt together. Recurring debt includes payments on credit cards, auto loans, child support, and the like.

Some example data:

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 on your own income and expenses, we offer a Mortgage Loan Qualifying Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We will be happy to pre-qualify you to determine how large a mortgage you can afford.

Harbor View Lending* a DBA of Megastar Financial can answer questions about these ratios and many others. Call us: (207) 571-8034.