Debt to Income Ratio

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

Understanding the qualifying ratio

For the most part, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

For these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything that makes up the payment.

The second number is what percent of your gross income every month which can be spent on housing costs and recurring debt together. Recurring debt includes things like auto loans, child support and monthly credit card payments.

For example:

28/36 (Conventional)

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, feel free to use our very useful Mortgage Loan Pre-Qualifying Calculator.

Guidelines Only

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

Statewide Funding can answer questions about these ratios and many others. Give us a call at (415) 456-7802.

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