Debt Ratios for Home Financing

The ratio of debt to income is a tool lenders use to calculate how much of your income is available for a monthly mortgage payment after all your other recurring debt obligations have been fulfilled.

Understanding the qualifying ratio

Typically, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

In these ratios, the first number is the percentage of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything.

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

Some example data:

With a 28/36 qualifying ratio

• Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
• Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
• Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, we offer a Mortgage Loan Pre-Qualifying Calculator.

Just Guidelines

Remember these are only guidelines. We will be happy to go over pre-qualification to help you determine how much you can afford.

At Custom Lending Group, we answer questions about qualifying all the time. Call us at 7072522700.