Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other recurring debts are paid.

About the qualifying ratio

Most 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 go to housing costs (including mortgage principal and interest, private mortgage insurance, hazard insurance, property tax, and homeowners' association dues).

The second number is what percent of your gross income every month that should be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes credit card payments, vehicle loans, child support, etcetera.

For example:

A 28/36 qualifying ratio

  • 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 on your own income and expenses, we offer a Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

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

At New Millennium Mortgage Co. NMLS: 331173, we answer questions about qualifying all the time. Give us a call: (941) 366-5800.

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