Debt Ratios for Home Lending

In the market for a mortgage loan? We'll be glad to discuss our mortgage offerings! Give us a call today at (650) 631-1800. Ready to begin? Apply Now.

The ratio of debt to income is a formula lenders use to calculate how much money is available for a monthly mortgage payment after all your other recurring debt obligations are fulfilled.

Understanding 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) 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 (including loan principal and interest, private mortgage insurance, homeowner's insurance, taxes, and homeowners' association dues).

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

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

Don't forget these are only guidelines. We will be thrilled to go over pre-qualification to determine how much you can afford. Bay Area Capital Funding . can answer questions about these ratios and many others. Give us a call: (650) 631-1800.