Debt/Income Ratio

The ratio of debt to income is a formula lenders use to determine how much of your income can be used for your monthly mortgage payment after all your other recurring debt obligations are fulfilled.

How to figure your qualifying ratio

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

For 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 hazard insurance, HOA dues, PMI - everything.

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

For example:

A 28/36 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 Loan Qualifying Calculator.

Guidelines Only

Remember these ratios are only guidelines. We will be thrilled to help you pre-qualify to determine how much you can afford.

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

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