Ratio of Debt to Income

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you've paid your other recurring loans.

About the qualifying ratio

Most conventional mortgages 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 your gross monthly income that can go to housing (including principal and interest, private mortgage insurance, hazard insurance, taxes, and homeowners' association dues).

The second number in the ratio is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt together. Recurring debt includes payments on credit cards, car loans, child support, etcetera.

Examples:

28/36 (Conventional)

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, use this Mortgage Loan Qualification Calculator.

Just Guidelines

Remember these ratios are just guidelines. We will be happy to pre-qualify you to help you determine how large a mortgage you can afford.

At Custom Lending Group, we answer questions about qualifying all the time. Give us a call at (707) 252-2700.

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