Debt-to-Income Ratio

The debt to income ratio is a tool lenders use to determine how much of your income is available for a monthly home loan payment after you meet your other monthly debt payments.

About your qualifying ratio

Most conventional loans need a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number in the ratio is what percent of your gross income every month that should be applied to housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, car payments, 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 run your own numbers, use this Mortgage Qualification Calculator.

Just Guidelines

Remember these are only guidelines. We'd be happy to pre-qualify you to help you figure out how much you can afford.

Baywide Funding Corporation can answer questions about these ratios and many others. Call us: 650 428 0234.