Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other recurring debts have been paid.

How to figure your qualifying ratio

In general, conventional mortgage loans need a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

In these ratios, the first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything that constitutes the payment.

The second number is what percent of your gross income every month that can be applied to housing expenses and recurring debt together. Recurring debt includes payments on credit cards, auto payments, child support, and the like.

For example:

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 on your own income and expenses, we offer a Mortgage Qualification Calculator.

Just Guidelines

Remember these ratios are only guidelines. We will be thrilled to go over pre-qualification to help you figure out how large a mortgage you can afford.

Custom Lending Group can answer questions about these ratios and many others. Give us a call: 7072522700.

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