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 a monthly mortgage payment after all your other recurring debts have been met.

About the qualifying ratio

Usually, underwriting for conventional mortgage loans needs 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. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything.

The second number is what percent of your gross income every month which can be applied to housing expenses and recurring debt. Recurring debt includes payments on credit cards, vehicle payments, child support, etcetera.

For example:

28/36 (Conventional)

  • 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 run your own numbers, use this Mortgage Pre-Qualification Calculator.

Guidelines Only

Don't forget these are only guidelines. We'd be thrilled to pre-qualify you to help you determine how much you can afford.

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

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