Debt/Income Ratio

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

Understanding your qualifying ratio

Typically, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything.

The second number 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 loans, child support and monthly credit card payments.

For example:

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 want to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We'd be happy to help you pre-qualify to help you figure out how large a mortgage loan you can afford.

At Atlantic Financial Services, we answer questions about qualifying all the time. Call us at (732) 969-9300.

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