Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after you've paid your other recurring loans.

Understanding the qualifying ratio

Typically, underwriting for conventional loans requires a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

For these ratios, the first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything.

The second number is what percent of your gross income every month that should be spent on housing costs and recurring debt. Recurring debt includes car loans, child support and monthly credit card payments.

Some example data:

28/36 (Conventional)

  • 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'd like to run your own numbers, we offer a Loan Pre-Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We'd be happy to go over pre-qualification to help you figure out how much you can afford.

Amity Mortgage LLC can walk you through the pitfalls of getting a mortgage. Call us at (203) 729-6681.

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