Debt-to-Income Ratio

The ratio of debt to income is a formula lenders use to determine how much money is available for your monthly mortgage payment after you have met your various other monthly debt payments.

Understanding the qualifying ratio

Typically, underwriting for conventional mortgages 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.

In 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 makes up the full payment.

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

Some example data:

28/36 (Conventional)

• Gross monthly income of $2,700 x .28 = $756 can be applied to housing
• Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $2,700 x .29 = $783 can be applied to housing
• Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, please use this Loan Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We will be happy to pre-qualify you to help you figure out how much you can afford.

Northeast Bancorp of America, Inc. can walk you through the pitfalls of getting a mortgage. Call us at (440) 234-9660.