Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after you have paid your other monthly loans.

About the qualifying ratio

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

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can go to housing (this includes principal and interest, private mortgage insurance, hazard insurance, taxes, and homeowners' association dues).

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

Some example data:

28/36 (Conventional)

  • 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'd like to run your own numbers, feel free to use our superb Mortgage Loan Qualification Calculator.

Guidelines Only

Don't forget these are only guidelines. We'd be thrilled to go over pre-qualification to determine how large a mortgage loan you can afford.

At Baywide Funding Corporation, we answer questions about qualifying all the time. Call us at 650 428 0234.