Debt Ratios for Home Financing

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after your other recurring debts have been paid.

Understanding the qualifying ratio

Usually, conventional mortgages need a qualifying ratio of 28/36. FHA loans are a little less restrictive, 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 (this includes mortgage principal and interest, PMI, homeowner's insurance, taxes, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income that should be applied to housing costs and recurring debt together. Recurring debt includes payments on credit cards, car loans, child support, etcetera.

For example:

28/36 (Conventional)

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

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

Just Guidelines

Remember these ratios are only guidelines. We will be happy to pre-qualify you to determine how large a mortgage you can afford.

Evolution Mortgage Inc. can walk you through the pitfalls of getting a mortgage. Call us: 631-273-1188.

Questions about DTI Ratios?

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