Ratio of Debt to Income

Your debt to income ratio is a tool lenders use to calculate how much of your income can be used for your monthly mortgage payment after all your other monthly debts have been fulfilled.

Understanding the qualifying ratio

For the most part, conventional loans need 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 go to housing (this includes principal and interest, private mortgage insurance, homeowner's insurance, property tax, and homeowners' association dues).

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 payments on credit cards, vehicle payments, child support, and the like.

For example:

28/36 (Conventional)

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, please use this Loan Pre-Qualifying Calculator.

Guidelines Only

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

Channel Mortgage LLC can walk you through the pitfalls of getting a mortgage. Call us at (718) 639-9500.

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