Ratio of Debt to Income

Your ratio of debt to income is a tool lenders use to calculate how much of your income can be used for a monthly mortgage payment after all your other monthly debt obligations have been met.

How to figure the qualifying ratio

Most conventional mortgage loans require a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

The first number is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything that makes up the full payment.

The second number in the ratio is what percent of your gross income every month that should be spent on housing costs and recurring debt. Recurring debt includes things like auto loans, child support and credit card payments.

Some example data:

28/36 (Conventional)

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, please use this Mortgage Loan Qualification Calculator.

Just Guidelines

Don't forget these are just guidelines. We'd be happy to pre-qualify you to determine how large a mortgage loan you can afford.

Custom Lending Group can answer questions about these ratios and many others. Give us a call at (707) 252-2700.

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