Ratio of Debt to Income

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after you have paid your other monthly loans.

How to figure the qualifying ratio

Typically, underwriting for conventional mortgages needs a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be spent on housing (including principal and interest, PMI, hazard insurance, property taxes, and HOA dues).

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

For example:

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 want to calculate pre-qualification numbers on your own income and expenses, feel free to use our Mortgage Loan Qualifying Calculator.

Just Guidelines

Remember these are only guidelines. We will be happy to go over pre-qualification to determine how much you can afford.

At Southwest Funding #841
Company NMLS # 303440, we answer questions about qualifying all the time. Give us a call: 5122916100.