Mortgage Calculations & Debt-to-Income Ratios

Making a higher down payment may cause a lender to stretch on mortgage ratios.

house image by Earl Robbins from

Your debt-to-income ratio is commonly used to assess your ability to repay a mortgage loan. The mortgage-to-income and debt-to-income ratios are the two common types used by lenders. Your credit history and down payment amount are additional considerations used by mortgage lenders to assess your home loan affordability.

Mortgage-to-Income Conventional

Conventional loans are available if you can meet the 20 percent down payment requirement. Conventional lenders use a general guideline of a 28 percent mortgage-to-income ratio when assessing your qualifications, according to LendingTree. This means that your potential monthly mortgage payment should not exceed 28 percent of your gross monthly income. On an income of $6,000, for instance, your mortgage payment should not exceed $1,680. These ratios are general guidelines, and strong credit scores or a higher down payment helps the lender justify allowing you to go over.

Mortage-to-Income FHA

The Federal Housing Authority loan program is the largest of government-backed loan programs. FHA loans are intended for borrowers who cannot meet conventional down payment requirements. FHA loans only require a 3.5 percent down payment. The standard maximum mortgage-to-income ratio on an FHA loan is 31 percent, according to the HUD website. For FHA-approved lenders to exceed this threshold, they must make notations of their justification when transmitting the loan.

Debt-to-Income Conventional

The debt-to-income ratio considers your other loan obligations along with your mortgage. Car payments, personal loan payments, credit card payments and any other monthly debt obligations are considered. The normal max ratio on a conventional loan is 36 percent, according to LendingTree. This means all of your monthly payments cannot exceed 36 percent of your income. In the prior example of a $6,000 gross monthly income, total debt outlays would have to be at or below $2,160 as a general guideline.

Debt-to-Income FHA

The standard FHA cap on debt-to-income is 43 percent, according to HUD. Using the $6,000 income example, you should keep total debt below $2,580 monthly. FHA borrowers are required to purchase mortgage insurance to get financing. This protects the higher risks to the lender of offering low down payment financing. Because of the insurance, FHA lenders can allow for slightly higher ratios.