Debt-to-Income Ratio

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

About your qualifying ratio

Usually, conventional mortgages require 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.

In these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that constitutes the payment.

The second number in the ratio is what percent of your gross income every month that should be spent on housing costs and recurring debt together. Recurring debt includes auto/boat payments, child support and credit card payments.

Examples:

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 calculate pre-qualification numbers on your own income and expenses, we offer a Loan Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We'd be happy to help you pre-qualify to help you determine how much you can afford.

At Statewide Funding, we answer questions about qualifying all the time. Call us: (415) 456-7802.

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