Ratio of Debt-to-Income

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

How to figure the qualifying ratio

For the most part, conventional mortgage loans require a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can go to housing costs (this includes principal and interest, PMI, homeowner's insurance, property 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 auto payments, child support and monthly credit card payments.

For example:

A 28/36 ratio

• 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 want to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Loan Qualification Calculator.

Guidelines Only

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

Custom Lending Group can walk you through the pitfalls of getting a mortgage. Call us: 7072522700.