Ratio of Debt to Income

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


Understanding your qualifying ratio

Most underwriting for conventional loans needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying 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 loan principal and interest, private mortgage insurance, hazard insurance, property taxes, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, auto loans, child support, et cetera.

For example:

A 28/36 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 want to calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Qualification Calculator.

Remember these are only guidelines. We will be thrilled to go over pre-qualification to help you determine how large a mortgage you can afford. Pinnacle Lending Group inc can answer questions about these ratios and many others. Call us: 480-442-3949. Want to get started? Apply Here.

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