Ratio of Debt to Income

The debt to income ratio is a formula lenders use to determine how much of your income can be used for your monthly home loan payment after you meet your various other monthly debt payments.

Understanding your qualifying ratio

Usually, underwriting for conventional loans requires 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 go to housing (including principal and interest, private mortgage insurance, homeowner's insurance, property taxes, and HOA dues).

The second number is what percent of your gross income every month which can be spent on housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, vehicle loans, child support, etcetera.

Some example data:

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'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our Mortgage Pre-Qualification Calculator.

Just Guidelines

Remember these ratios are only guidelines. We will be happy to pre-qualify you to help you determine how much you can afford.

At Ward Kilduff Mortgage, we answer questions about qualifying all the time. Call us: (860) 658-7100.

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