Debt Ratios for Home Lending

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after your other recurring debts have been paid.

How to figure the qualifying ratio

Most underwriting for conventional mortgage loans requires a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

The first number is the percentage of your gross monthly income that can go toward housing costs. 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 can be spent on housing expenses and recurring debt together. Recurring debt includes things like auto/boat payments, child support and credit card payments.

Some example data:

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 with your own financial data, we offer a Mortgage Qualifying Calculator.