Debt-to-Income Ratio

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you have paid your other recurring debts.

Understanding the qualifying ratio

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

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be spent on housing costs (including mortgage principal and interest, private mortgage insurance, hazard insurance, property taxes, and homeowners' association dues).

The second number in the ratio is the maximum percentage of your gross monthly income that can be applied to housing expenses and recurring debt together. Recurring debt includes credit card payments, vehicle payments, child support, etcetera.

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 with your own financial data, please use this Mortgage Pre-Qualification Calculator.

Guidelines Only

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

At Boardwalk Mortgage, we answer questions about qualifying all the time. Call us: 1-800-606-2794.