Debt-to-Income Ratio

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after your other recurring debts have been paid.

How to figure your qualifying ratio

Typically, underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be applied to housing costs (this includes mortgage principal and interest, private mortgage insurance, hazard insurance, taxes, and HOA dues).

The second number is what percent of your gross income every month which can be applied to housing expenses and recurring debt together. Recurring debt includes things like car loans, child support and monthly credit card payments.

Some example data:

With a 28/36 qualifying ratio

  • 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'd like to calculate pre-qualification numbers with your own financial data, feel free to use our very useful Mortgage Loan Pre-Qualifying Calculator.

Guidelines Only

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

At Custom Lending Group, we answer questions about qualifying all the time. Call us: (707) 252-2700.

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