Debt Ratios for Home Financing

The ratio of debt to income is a tool lenders use to calculate how much money can be used for a monthly mortgage payment after you meet your various other monthly debt payments.

How to figure your qualifying ratio

In general, underwriting for conventional mortgages needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying 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, PMI, homeowner's insurance, property taxes, and homeowners' association dues).

The second number in the ratio is what percent of your gross income every month that can be applied to housing costs and recurring debt together. Recurring debt includes things like auto payments, child support and credit card payments.

For example:

28/36 (Conventional)

• Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
• Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
• Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, we offer a Loan Qualifying Calculator.