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Debt/Income Ratio

The ratio of debt to income is a formula lenders use to calculate how much money can be used for your monthly mortgage payment after all your other monthly debts are met.

About the qualifying ratio

For the most part, underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be applied to housing costs (this includes mortgage principal and interest, private mortgage insurance, hazard insurance, taxes, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income which can be spent on housing expenses and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto/boat payments, child support, etcetera.

For example:

A 28/36 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 Qualification Calculator.

Just Guidelines

Remember these are only guidelines. We'd be happy to pre-qualify you to help you figure out how much you can afford.

At Greystone Loans, Inc., we answer questions about qualifying all the time. Call us at (909) 467-1090.

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