Debt-to-Income Ratio

Mortgage lenders look at a person's debt-to-income ratio to see how much money the person can qualify to borrow. This ratio is figured by dividing a person’s total monthly payment obligations by his or her monthly income.

Loans backed by the Federal Housing Administration (FHA) allow borrowers to use up to 29 percent of their gross income for housing costs and 41 percent for housing costs plus non-housing debt payments such as those for car loans, child support, or alimony.

Loans offered by banks and mortgage companies, known as conventional loans, allow 28 percent of a person’s gross income to go toward housing and 36 percent toward the combination of housing and non-housing debt.

To find out how much you can afford to pay for your monthly mortgage payment, fill out the Your Mortgage: How Much Can You Afford? worksheet.

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