Ratio of Debt to Income

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

Understanding your qualifying ratio

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

For these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything that makes up the payment.

The second number is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt together. Recurring debt includes things like auto/boat payments, child support and credit card payments.

Some example data:

With a 28/36 ratio

• Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
• Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
• Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, we offer a Loan Qualifying Calculator.

Guidelines Only

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

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