Ratio of Debt-to-Income

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

Understanding the 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) ratio.

For these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything that constitutes the payment.

The second number is what percent of your gross income every month that can be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, car payments, child support, and the like.

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

Guidelines Only

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

Augusta Mortgage Solutions can answer questions about these ratios and many others. Give us a call at 706-860-5514.

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