Ratio of Debt-to-Income

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

Understanding the qualifying ratio

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

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be applied to housing costs (including loan principal and interest, private mortgage insurance, hazard insurance, property taxes, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes payments on credit cards, car payments, child support, etcetera.

For example:

28/36 (Conventional)

  • 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 run your own numbers, feel free to use our superb Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

Remember these ratios are just guidelines. We will be happy to go over pre-qualification to help you figure out how much you can afford.

Executive Lending Group, LLC can answer questions about these ratios and many others. Give us a call at (816) 525-8000.

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