Debt to Income Ratio

Your ratio of debt to income is a tool lenders use to calculate how much money can be used for your monthly home loan payment after you have met your other monthly debt payments.

How to figure 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 amount (as a percentage) of your gross monthly income that can go to housing costs (including loan principal and interest, PMI, homeowner's insurance, property tax, and homeowners' association dues).

The second number in the ratio is what percent of your gross income every month which can be spent on housing expenses and recurring debt together. Recurring debt includes vehicle payments, child support and credit card payments.

Some example data:

A 28/36 qualifying ratio

  • 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 calculate pre-qualification numbers on your own income and expenses, please use this Loan Qualifying Calculator.

Just Guidelines

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

Ward Kilduff Mortgage can walk you through the pitfalls of getting a mortgage. Give us a call: (860) 658-7100.

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