Debt to Income Ratio

Your debt to income ratio is a formula lenders use to determine how much of your income is available for a monthly mortgage payment after you meet your other monthly debt payments.

About the qualifying ratio

Most conventional mortgages require a qualifying ratio of 28/36. FHA loans are a little 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 be spent on housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything that constitutes the payment.

The second number is what percent of your gross income every month that should be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, car loans, child support, and the like.

Some example data:

A 28/36 ratio

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, please use this Mortgage Loan Qualifying Calculator.

Guidelines Only

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

At Southwest Funding #841, we answer questions about qualifying all the time. Give us a call at (512) 291-6100.

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